Strong Economic Reports Provide Encouragement for Housing Market
As the holidays approach, the Bay Area housing market is wrapping up a very strong 2013, with solid sales volume and double-digit sales price increases compared to last year. No one knows for sure what 2014 will bring, of course, but several new reports out this week provide encouragement for the market as we head into the new year.
Perhaps the strongest bit of good news came Friday when the U.S. Labor Department announced that employers added 203,000 jobs last month, more than analysts had expected. November’s job gains helped push unemployment to a five-year low of 7 percent from 7.3 percent. The past four months have now averaged 204,000 jobs created, up from 159,000 the previous four months.
Friday’s news followed other encouraging signals earlier this week. The Bureau of Economic Analysis announced that the nations GDP grew 3.6 percent in the third quarter, much faster than expected and considerably higher than the BEA’s initial reading of 2.8 percent.
And finally, new home sales soared in October after three months of relatively soft sales, evidence that the housing recovery may be gaining steam. The Commerce Department announced sales of new homes grew 25.4 percent to a seasonally adjusted annual rate of 444,000 – the largest monthly percentage increase since May 1980.
What does this all mean for Wall Street and Main Street? For much of the past year, Wall Street inventors have read good economic news as “bad news” – a paradox driven by investor fear that the Fed would start tapering its bond buying program sooner rather than later if the economy heated up. That could drive interest rates higher and put a damper on investments.
But on Friday, investors took the “cup half full” approach and cheered the good economic news as a sign that a stronger economy could help boost corporate earnings in the year ahead. The stock market finally read good news as good news and rallied on the jobs report, sending the Dow surging 198 points to top the 16,000 level once again.
The improving economic reports also give Main Street and the housing industry reason to cheer as the year draws to a close.
A strong employment market is one of the most critical underpinnings of a healthy housing market. Consumers without a job or in fear of losing the one they have aren’t likely to be buying homes. And while the 7 percent jobless rate and the 200,000+ job creation level still is well below where we want to be, the job market now appears to getting better all the time.
Only time will tell whether this week’s bullish economic reports are the start of even greater improvement for the economy in the coming year. But at least for now, buyers, sellers and real estate agents all have reason to be optimistic that 2014 will indeed be a Happy New Year.
Below is a market-by-market report from our local offices:
North Bay – Our Mill Valley office says high-end sales have been strong for Southern Marin with three pending sales over $3 million. Only about 10% of the homes listed above $4 million are under contract though. Our Central Marin offices say it has been slower the past week or two due to Thanksgiving. There are only two weeks left of any real activity prior to the holidays, leaving agents gearing up for the new year. The seasonal tap has turned off for new listings, our Sebastopol manager reports. Buyers are still kicking tires but want new inventory. The few open houses over the holiday weekend all had attendance in the single digits as opposed the large crowds we saw earlier in the season.
San Francisco – Lakeside office agents are reporting that they have buyers who want to complete their house shopping as soon as possible. They are keeping up the diligent search through the holidays. But sellers have retreated and many say they will wait until next year. For the few who are ready to open their homes during the holidays it looks as if they will be receiving a very warm response. The City’s inventory in homes and condos dropped sharply through Thanksgiving to now, our Lombard office manager reports. There were some new listings this week, but many agents are waiting until January to list their homes. The long weekend still brought in some transactions and good open traffic. Lender underwriting and conditions are still delaying some closings. Similarly, our Market Street office manager notes that the inventory, which has been low all year, is now even more so as the holidays quickly approach. All ratified listings this period received multiple offers, but the number only ranged from 2-4 in each case. At this point, homeowners that have plans on selling are preparing for a January unveiling.
SF Peninsula – Everyone is scrambling to close before Christmas/year-end, and there is little new inventory to report, according to our Burlingame offices. Agents are working diligently to unearth listings that are not on MLS. They are contacting sellers who had previously listed and didn’t sell. This has resulted in a few sales. That familiar “sweet spot” of $1-1.5 million is still highly sought after. There is plenty of pent up demand when these properties come to the market. There has been an end of year slowdown in much of the upper end market. There still are several transactions scheduled to close before year-end and the smart cash buyers are definitely shopping right now. The inventory is really shrinking so the right property in the right location is getting major interest. Our Menlo Park manager says sales have been steady, but multiple offers are appearing less frequently with fewer new listings. There were just eight new listings on tour this week in the five-city local area. In Palo Alto area, there are just four single-family homes on the market. Because of the lack of inventory and the holidays everything is moving very slowly in the Redwood City-San Carlos area, too. The few listings will likely command multiple offers. Sales were not bad in the Woodside/Portola Valley area this last couple of weeks. Agents and clients are still roaming the streets looking for properties.
East Bay – Our Berkeley manager says the local market has been very quiet these pre-holiday and holiday weeks. Some listings that have been on the market for several weeks now have ratified offers and some even received sudden multiple offers. One buyer returned to a listing that had gone off market and buyer and seller were happily reunited. There has been a 25% decrease in Inventory for the Tri-City marketplace. Appraisals are starting to come in lower than the sales price, our Fremont manager reports. Sales in the Lamorinda area are easing as the holiday season gets underway. Our Walnut Creek office manager notes that buyers are still out there, especially in certain pocket neighborhoods where there are still bidding wars. Sellers seem to be waiting for the new year, however.
Silicon Valley – A few of the Cupertino agents are still extremely busy, but things have definitely shifted into holiday mode. Inventory continues to be scarce with only six single family homes in the town of Los Gatos, in the Los Gatos School District, under $1.5 million. The Previews high-end market is steadily improving. There are only 15 active single-family homes in the Almaden area of San Jose as of last Monday. The Willow Glen market is also experiencing the seasonal slowdown with new listing inventory, resulting in a contraction in the area’s inventory of homes for sale. New product coming to the market is generating a lot of attention even during this holiday season. We are seeing multiple offers and homes being bid over the asking price. A Willow Glen home received immediate attention upon coming to the market and was under contract in 48 hours with multiple offers well over the asking price.
South County – South County (as in the rest of the Bay Area) is experiencing a seasonal slowdown. Though sales were strong in the first part of November, activity fell dramatically as the Thanksgiving holiday approached. Listings remain scare (in all price points) and agents are reporting that attendance at open houses is lackluster at best. The one bright spot in the local market, however, remains new construction activity. In both Morgan Hill and Gilroy builders are selling new homes as fast as they can be completed. Demand for new homes is very, very strong, with potential buyers waiting months for the opportunity to write an offer as each new phase is released to the public. One Morgan Hill builder is now taking “reservations” for homes that will not be completed until August or September of 2014.
Santa Cruz County – The 2013 real estate market has tracked very similarly to the 2012 market. Prices have been going up due to a continued lack of inventory, however, the number of total home sales will end up being very close to what those same numbers were last year. There are very few good, well-priced homes for sale, and if one comes on, it sells quickly. Median price is about $649,000, up from $500,000 a year ago. Lack of inventory continues to hold back the number of sales. There has not been much change in the Previews end of the market, over $1 million in Santa Cruz County. Of the 462 active listings, 152 of those are priced over $1 million representing 33% of the total market. Sales appear to be very hit and miss; no consistency or trending that can be identified. A property may sit on the market at the same price for months and then suddenly two offers appear. 40% of all deals are cash, and includes the high-end sales. Prices are nowhere near where they were at the peak in the upper end segment.
Monterey Peninsula – The Thanksgiving holiday weekend was especially busy with foot traffic in our Carmel Ocean Ave office and both Pacific Grove offices. Agents reported meeting new clients and as of this morning, there is an offer in on one of our listing that resulted from an out of area walk in. The Monterey Peninsula November property sales were 105, down from 135 in November of 2012 and -2.8% lower than the 108 sales last month. November 2013 sales were at their lowest level compared to November of 2012. The median sales price in November was $607,000, up 1.3% from $599,000 in November of 2012 and down -13.6% from $702,344 last month. The average sales price in November was $914,153, up 7.9% from $847,059 in November of 2012 and up 4.3% from $876,458 last month. The total inventory of properties available for sale as of November was 529, down -11.5% from 598 last month and down -14.0% from 615 in November of last year. November 2013 Inventory was at the lowest level compared to November of 2012 and 2011. There are several multi-million dollar sales in the pipeline that are scheduled to close the end of this month and into January. The high- end market is strong for vacation homebuyers as usual.