Forbes magazine in its most recent issue ran an interesting article taking a good hard look at the nation’s housing market at the mid-year point. It’s conclusion, as the headline proclaims, the market is “firing on most cylinders.”
The article notes that despite a slight pullback in June, the first half of the year has seen favorable underlying trends in all three of the important metrics: New construction starts were up 24% in the first half of 2013 compared with the first half of 2012. Existing home sales (excluding foreclosures and short sales) were up 32% year-over-year in June. And the delinquency and foreclosure rate was down 14% year-over-year in June.
“Overall, the housing market is in healthy shape,” the article declares. The publication notes that home prices climbed “steeply” in the first half of the year, outpacing rents, but are “far from bubble territory.” Forbes does acknowledge higher interest rates are a concern, but notes that the increase in rates hasn’t caused a decline in sales. And lastly, inventory has finally started expanding – gradually – after hitting a 12-year low earlier this year.
According to the Trulia’s Price Monitor, asking home prices were up 10.7% year-over-year in June. Prices rose year-over-year in 99 of the 100 largest metros, most sharply in California and elsewhere in the West. In contrast, rents rose just 2.8% year-over-year nationally. But this is a rebound, the article notes, not a bubble: “Prices still look 7% undervalued compared with long-term fundamentals, and buying a home is still 37% cheaper than renting.”
As well as the overall market has performed, the luxury market has done even better this year – and continues to do so as summer rolls on. Our Coldwell Banker Residential Brokerage luxury market reports underscore the strength of the high-end market from Marin and San Francisco to Silicon Valley and the East Bay. Even the Tahoe luxury market has been on fire. Here’s a brief look at the most recent results:
- Silicon Valley luxury sales (over $1.5 million) were up 24% in June from a year ago;
- San Francisco saw sales over $2 million nearly double in the second quarter of the year (April through June) compared to the first quarter and up 75% from a year ago;
- Marin County luxury sales over $1 million surged 65% in June from a year ago;
- The East Bay saw million-dollar sales in Contra Costa and Alameda counties jump 49%;
- And North Lake Tahoe reported a 55% spike in luxury sales over $1 million.
No one knows what the second half of the year might bring. And certainly, interest rates, the economy, the jobs market, and geo-political events will all play a role in the health of the housing market. But based on what we’re seeing recently, we have reason to be encouraged.
Below is a market-by-market report from our local offices:
North Bay – Demand is still strong but some homes in certain areas and higher price points are beginning to stay on the market longer, our Greenbrae manager said. Sunday open houses are still very busy (for summer). There has been a fair amount of new inventory came on the market in July, which normally isn’t a big inventory month. Our Petaluma manager reports that the local market continues to be robust, garnering multiple offers in all price ranges.
San Francisco – Summer doldrums, higher interest rates, higher list prices, mixed messages on the economy – and yet, the inventory remains at historic low levels and properties are selling quickly by national standards, but a little slower by ours, according to our Lakeside office manager. Still, sellers who price higher than the market will bear are left disappointed with no offers or none they find acceptable. Our Lombard manager reports that after a slower couple of weeks, agents have seen a surge in multiple offers this week: 8, 12 and 13 offers on listings, one 20% over asking. Even though we’re in the throes of the usual summer slowdown, open houses continue to be well attended by ready, willing, and able buyers, according to our Market Street office manager. While some sellers are waiting to bring their homes to market after Labor Day, those sellers doing it now are being rewarded with less competition and multiple offers (anywhere from 2 to 16 during this period). And our Sunset manager notes that the local market appears to be slowing just a bit, mainly because summer vacations are in full swing. Almost all ratified offers were in multiple offer situations, but the number of offers has decreased slightly.
SF Peninsula — There has been a slight slowing these past two weeks, providing a welcome breather to agents and buyers alike, our Burlingame manager reports. While almost every home is seeing multiple offers, the number has become 3-5 instead of 20 plus on most properties. The exception is still the rare, great location, super oversized lot or floor plan that provides upside opportunity in a sought after neighborhood. Those properties frequently see overbids at 200k+ over asking. One Burlingame listing this week had 7 offers and sold 21% over asking price! Many sellers have observed the price escalation of the last year and are beginning to reach too far in setting a list price. Buyers are very well educated, know their values and know when to wait to make an offer. Hillsborough currently has 62 active and 17 pending sales. That reflects a little stronger sales activity and shows continued stability in the upper end market. Cash buyers are still seeking out the prime locations in Hillsborough, which remains the best buy on the Peninsula for luxury properties. According to our Burlingame North office manager, in the under $2M range there are multiple offers on anything that is priced right and is presented to the market properly. Agents have experienced the market moving faster than the comparable sales for some time, but it seems to be moving even faster these past couple of weeks. Inventory been increasing slightly but scooped up quickly. There has been brisk activity on the coast without the number of multiple offers one sees on the mid-Peninsula. You can still purchase a 3 bed-2 bath home in good condition in the $600-$650 range. Our Menlo Park manager reports fewer sales and even fewer listings – buyers are out but in smaller numbers. Fewer cars on El Camino as people are out of town. The inventory in the Palo Alto area remains very low. Last week there were only six properties to tour for the entire district. Over half of the sales in the Redwood City-San Carlos market were multiple offers – as few as two and as many as 10. Location is still the primary factor, but if the home shows extremely well the location is not as important a factor. The Woodside-Portola Valley market is slower in general with fewer people at open houses and very few new listings. If a decent house becomes available – it will still have a number of offers and sell fast.
East Bay – Berkeley agents had a crazy busy July. Lots of offers written of course, but a good number accepted with strong competition. In general, fewer visitors to our open houses, but one house this past weekend had 100 visitors. Active inventory in Fremont is now ahead of pending properties. Our Oakland manager says there has been lots of activity at open homes. The number of packets to number of offers have slowed down, i.e. 10 packets out 1 or 2 offers as opposed to 4 in the recent past. Many buyers are putting their home search on hold until after Labor Day, when inventory is rumored to be increasing. Because of more inventory, Pleasanton and Livermore agents are not seeing such a buyer’s frenzy. But homes are selling if priced right. And in Walnut Creek, agents are starting to see an increase in inventory with prices still maintaining current levels. Homes are starting to stay on the market longer with fewer offers competing against each home. They’re still seeing cash offers but those are starting to slow down except in the lower end. In the Previews upper end of the market, sellers are doing price reductions to garner more interest. There hasn’t been as many cash offers in this range at this time.
Silicon Valley – Things continue to be very busy, our Cupertino manager says. The number of multiple offers has decreased from the peak, but the prices are getting bid up as high as ever. More listings are coming on and getting snatched up rapidly. Our Los Gatos manager reports that opportunistic buyers are taking advantage of a small slowdown to negotiate on their purchases. The San Jose-Almaden area market is softening somewhat with inventory increasing. Meanwhile in Willow Glen, agents experienced a larger than anticipated listing inventory surge the week after the 4th of July holiday. As the month as progressed the weekly listing inventory has been moderate. The real story is the number of buy side transactions that our office has facilitated is up significantly the last two weeks. This has been the busiest two weeks agents have experienced all year with new open sales. Buy side transactions per week the last two weeks have doubled. In the Saratoga area, multiple offers are tapering off from 20 per home to 7 or less, and often 2-3. Sellers have increased their list prices to reflect this year’s appreciation and therefore buyers are not feeling the need to bid 5-8% over list like they used to.
South County – Morgan Hill agents are experiencing a unique phenomenon with many sellers accepting contingent offers on their properties. This is especially true for “higher end” homes, as that segment of the market has slowed considerably. Moderately priced homes (in the $500,000 to $600,000 price range) continue to garner multiple offers allowing those sellers to “move-up” to larger homes. The listing inventory continues to grow. As of July 30 there were 97 single-family homes available in Morgan Hill—a significant jump from previous months. Higher interest rates continue to have an impact on the market. And some buyers, in order to qualify, are looking at variable rate loans as opposed to 30 year fixed rate financing.
Santa Cruz County – The real estate market in Santa Cruz continues to move at a steady pace. Inventory levels, while somewhat higher than previous months, still hover around the 3-month mark of unsold properties. Prices are adjusting in the under $700,000 range as there are fewer buyers currently bidding. They are being very cautious and do not want to overpay for a property. Sellers listening to the media about a better market and higher prices are listing their properties (in some cases) higher than what current market value is.
Monterey Peninsula – The Peninsula market continues to improve but traffic and offers have been on the slow side, according to our local manager. The open house traffic has been very good, especially with out of area visitors escaping the heat for the cool climate. Our manager has spoken with a few agents who have picked up new buyers at their open house, which is encouraging.