Luxury Home Sales Continue to Climb Around the Bay
The Bay Area’s luxury housing market turned in another strong performance in September, according to Coldwell Banker Previews latest luxury market reports released this week. But there are indications around the region that the red-hot luxury market may finally be cooling off ever so slightly as we head into the fall and winter months.
Sales of $2 million and up homes in San Francisco surge 53 percent in the third quarter of the year (July-September) compared to the same period last year. There were 116 high-end sales during the three-month period compared to 76 a year ago. And the median sale price climbed 5.6 percent year over year.
The upper end of The City’s luxury market was particularly strong with 51 sales over $3 million vs. 29 last year, and 31 sales in excess of $4 million, more than double a year ago. The grand prize was a six-bedroom, seven-bath 8,800 square foot mansion in Pacific Heights that went for $18 million.
Silicon Valley’s luxury market also was quite strong last month with sales of $1.5 million-plus properties jumping 41 percent compared to last September. A total of 131 luxury properties changed hands last month, up from 93 last year. And there were 20 sales over $3 million, more than double the number last September.
The same story was echoed in Marin County, which posted a 34 percent rise in million-dollar sales. The capper was a 15,000 square foot mansion with seven bedrooms and 10 baths in Belvedere that went for a whopping $24.5 million.
Finally, across the Bay, million-dollar sales in Alameda and Contra Costa counties spiked 49 percent last month. There were 189 luxury sales in the East Bay, up from 127 last September. Fourteen homes sold for more than $2 million, up from nine a year ago.
But there are signs that the luxury market is easing a little as we move toward the end of the year. Sales in September were markedly lower in all regions compared to August. Some of the drop is due to normal seasonal declines, but perhaps not all.
In talking with our local offices, we’re seeing just a bit of cooling in the marketplace. It’s still a very healthy market by historical standards, just not quite as frenetic as it was three or six months ago. There still are multiple offers on many homes, but not all. And where there are multiple offers, the number might be two or three compared to eight or 10 before on prime properties.
While inventory is still low in most communities, it is gradually increasing, giving buyers more options to pick from and leaving them with the sense that they don’t have to rush their decision as they had to earlier this year.
It will be interesting to see what the coming weeks will bring before year-end. But realistically, we couldn’t sustain the frenzied seller’s market forever. And if we are seeing the scales move back into a better balance between buyers and sellers, that may not be a bad thing for the long-term health of the local housing market.
Below is a market-by-market report from our local offices:
North Bay – After a brief slowdown, perhaps around a time of uncertainty with the government shut-down, the pace has picked back up and is brisk for late October – usually a time when things start to wind down – according to our Central and Southern Marin manager. We are seeing movement in the $3-5 million range. Tiburon, Sausalito, Mill Valley, Corte Madera and Fairfax are the hot markets du jour, though all are really performing well. Our Sebastopol manager said the government shutdown had a chilling effect on his local market this period. Inventory remains tight and while open house attendance is strong many buyers are reluctant to make the offer. He said it feels a lot like the end of year slowdown has come earlier than ordinarily expected.
San Francisco – Our San Francisco Lakeside manager notes that agents throughout San Francisco are talking about a “change in the market.” And the change is perceptible. The change is from a market where buyers climbed all over each other to secure a property to a climate where buyers are more circumspect. We see a few multiple offers on most properties compared to more frequently over a dozen offers per property a couple of months ago. Yet securing a property still requires superior agent skill and strong buyer commitment. Simultaneously, on a few properties this past week there were offers in the double digits. Our Lombard office says that while there seems to be a general cooling of the market and drop in frenzy, it is not consistent across the board. More solo offers and emails re price reductions and back-on-markets. But then a listing brings 11 offers, way over, just like April –June. Pricing is critical and sellers should be happy with asking, thrilled on anything over. Our Market Street manager says agents continue to see multiple offers (anywhere from 2 to 12 during this period), but there’s definitely a sense that the frothiness has gone from the market. While several properties are getting lots of over-asking offers, we also saw a few that did not receive offers on their offer date (opening the door for savvy buyers). And finally, our Sunset office reports that open houses are still well attended but not as overwhelmed as 3 months ago. Nowadays, a typical 1st open house will draw 20-40 groups whereas before would have over 100 groups. The sharp increase in prices and interest rate may have priced out some potential buyers.
SF Peninsula – Hillsborough currently has 50 active and 17 pending listings. This number has remained very stable throughout the year as properties have sold and new listings come on the market. Burlingame has the largest inventory we have seen this year. There are 29 active listings and 22 pending sales while sought after Millbrae has just 6 active and 14 pending sales. The fall market definitely has very savvy buyers who hope to be in their new home for the holidays but who are unwilling to pay absolutely anything, as was the case this spring. This market is steady in the under $4 million range, but activity is slower in homes priced above. The hot market is in the $800,000 to just under $2 million. Generally, these homes are getting 2-4 offers but sometimes as high as six. Homes that are well priced, staged and need little or no renovations are in high demand and are receiving overly enthusiastic overbid sales prices. Agents haven’t experienced any delays in funding or closing due to the government shut down and delays of IRS tax return verifications. Our Menlo Park manager reports that cash is still king. Clients who need a loan are still struggling. We’re seeing more Facebook buyers with the stock hitting highs. Some big buyers are out there now looking. First time open houses are very heavily attended in the Redwood City-San Carlos area. There’s still a definite lack of inventory in San Carlos & Belmont, slightly more inventory in Redwood City, which for a single-family residence is a bit more affordable. But slowly those prices are also rising. Location is still important but a single-family residence that is in outstanding condition in a less desirable location is still commanding multiple offers and selling well over list price. Most agents are writing several offers for clients before getting an offer accepted. In San Mateo, there has been a possible cooling of the local market. Sales have decreased along with a decline in inventory. Woodside continues to have some big buyers still looking but not buying quite yet.
East Bay – Still a hot sellers’ market in Berkeley, but even in this market list prices matter. In Berkeley, conservatively priced homes usually bring multiple offers pushing the purchase price up 6-17% or more. But, homes that are priced above the buyers’ perception of value are sitting. The asking price is still crucial to a home’s appeal. Price reductions that finally reach the “right” price point get sudden activity again and sell. Our Castro Valley manager noted that open houses on Saturday are getting better attendance than Sunday. Our Oakland-Piedmont office says open house activity is still brisk with new buyers coming back to the market. However we have had several incidences of disclosure packets going out in the double digits yet only one offer coming in if any on the offer date. When checking back with the agents the most common answer is that their buyers do not want to compete. The Walnut Creek area market is very soft and not much activity. We are still seeing price reductions in this area and agents are definitely feeling a slowdown in both listings and sales.
Silicon Valley – Our Cupertino manager says things have quieted down a bit. The number of multiple offers per home has dropped and things are not getting bid up quite as frenetically, in most cases. The Los Gatos market continues to a see a severe lack of inventory. Currently there are only 12 homes for sale in Los Gatos/Monte Sereno in the school district under $2,000,000. In the San Jose Almaden area, it was a slower than normal week, something agents weren’t expecting to see until late November. It appears we have two markets in the Willow Glen area: “Market price” and “Prime Market price.” The overall listing inventory continues to contract each week with the prime properties selling quickly with multiple offers over list price, then we have listings that will sit for weeks then a price adjustment typically under list price. Sales activity has resumed to a more normal pace since the government shut down has ended.
South County – The South County continues to offer buyers an affordable alternative to other areas in Silicon Valley. The old slogan “Drive a Little, Save a Lot” certainly applies to the housing market. High-end buyers are continually finding that they can get more for their money in South County compared to other areas. Agents are reporting increased interest in homes listed in Morgan Hill and Gilroy that are listed over $1 million. Attendance at these open houses has been unusually strong. During the first several weeks of October, Morgan Hill agents put into contract seven homes priced at or around $1 million. When comparing these homes with those offered in other areas, buyers are able to acquire a larger home, on a larger lot at a bargain price. In addition, new construction sales are very strong—with many buyers forced to be put on a waiting list as they await new releases of certain homes.
Monterey Peninsula – The mid-market inventory in this area has continued to slow with less inventory available for buyers to choose from. The luxury second home market has slowed down compared to the past few months and it looks like the 4th quarter will see a slight downward trend and probably down in the 10% range over Q4 2012. Inventory on the Monterey Peninsula immediate market is at a 6-month level vs. a 4-month level same period 2012. Our median home sale on the Peninsula is at $915,000 vs. just under $850,000 same period last year. We continue to see a recovery in values but buyers are still cautious and looking for a good value especially in the high-end luxury homes. Purchase price is still approximately 30% or more than replacement cost.