If you thought the Bay Area’s luxury housing market was on fire last year, you weren’t mistaken. In fact, it turns out 2013 was a record-setting year for luxury home sales in our region, according to a new report out this week.
DataQuick, the La Jolla-based real estate information services company, confirmed what agents and their clients suspected all along: There were more luxury sales in the Bay Area last year than in any other year since the firm began keeping records dating back more than 25 years.
Alameda County had a 70 percent surge in sales over $1 million, followed by Contra Costa County with a 63 percent spike, according to countywide data reported in the San Jose Mercury News. San Mateo, San Francisco and Santa Clara weren’t far behind with increases of 39 percent, 34 percent and 29 percent, respectively.
The DataQuick numbers are based on new and existing sales, both single-family and multiple-family dwellings, such as condos and townhouses.
Although $1 million buys a “luxury” property in some parts of the Bay, it may take $2 million or even $3 million or more in other communities. And that multi-million-dollar segment of the market, our Coldwell Banker Previews market, was as hot as any last year.
According to DataQuick data provided to the Mercury, there were 2,604 homes that sold for more than $2 million in the Bay Area last year, a 28 percent jump from a year ago. Most of the top sales were concentrated in Silicon Valley, the Peninsula and San Francisco, communities filled with newly minted millionaires looking to invest stock option money into the housing market.
Stubborn unemployment, rising interest rates and a slow economic recovery didn’t seem to have much of an impact on the high-end market, according to industry economists.
“The luxury home market is unique…,” said John Walsh, president of DataQuick. “It responds to its own set of economic factors. Things like job growth, mortgage interest rates and migration patterns do not play the same role as IPOs, stock market performance or how well one type of investment does compared to another, and where one wants to park one’s excess money.”
And it wasn’t just the Bay Area that saw a surge in luxury sales last year. DataQuick reported that statewide, 840 homes sold for more than $5 million in 2013, an all-time high and up 20.3 percent from the previous record in 2012.
Hillsborough recorded the second-highest number of million-dollar sales in the state last year with 436, just behind Manhattan Beach in Southern California, which had 439. Saratoga, Menlo Park, Cupertino, San Jose and Woodside were all ranked in the top 15 in the number of sales over $1 million.
Below is a market-by-market report from our local offices:
North Bay – Listing inventory is still very low, according to our Novato manager. There are only six new listings on tour this week in Novato. In San Rafael, agents are back to work from the holidays. Open houses are picking up and there has been lot of buzz around the local office. Hopefully the new listings will relieve some of the pent up demand from early January. Inventory levels in the Santa Rosa area are continuing to show stress and many homes are once again receiving multiple offers after a brief lull that bridged December and early January. Home sellers are beginning to be concerned about securing their replacement homes if they are going onto the market. As a result, our local manager says, it is anticipated that we may see more use of the Contingent upon Purchase contracts being utilized to support their fears and minimize risk.
San Francisco – It has been a slower start to the year than normal, according to our Lombard office manager, as there has been decidedly no New Year’s surge of new listings thus far. There are just four more homes and eight more condos compared to last week’s citywide inventory. While there are some signs of heightened buyer caution, winning buyers will have to remain very aggressive. It’s the same song in the upper Market Street area: Not enough inventory for too many buyers. The only properties that didn’t result in multiple offer situations during the past couple of weeks were from buyers that opted for new construction condos. Those sellers that are prepared to jump into the market are being well rewarded. Extreme examples include a Glen Park home that sold for $500K over asking (all cash), and a Bernal property that sold for $300K over asking (also all cash). Our manager’s plea to sellers: Come out, come out wherever you are! Listing inventory has inched up slightly in the Sunset district. The few available listings on the market are getting a lot of attention and offers. Two Sunset listings priced around $800,000 received 20 offers each and went 20% over asking price, cash.
SF Peninsula – Last year’s market for buyers could have been classified as crazy with the multiple offers and strong overbids, notes our Burlingame North office manager. The number of offers tapered off towards the end of the year, but the overbids were still very ambitious. So far this year, the market for buyers has morphed into “verifiable insanity.” In the entry, mid, and upper middle markets, inventory seems lower than last year at this time and the number of offers has increased again. The overbidding sales prices have no relevance to the most recent comparable sales. Homes in those marketplaces, that are priced right, staged and prepared for market with disclosures and reports are seeing 20-30% increases in price over last year. According to our Menlo Park manager, every agent is looking under every rock for a house to sell. Agent nerves are frayed. It has been a very slow start to the year in the Redwood City-San Carlos area. The lack of inventory and a massive amount of buyers, with money, is creating a very challenging market. There has been huge attendance at the few open houses. Our Woodside manager notes they have already had a couple of good-sized sales in the new year.
East Bay – There still are a lot of new buyers to the Oakland-Piedmont market visiting open homes and not much inventory available. The number of multiple offers has gone up in the last week. For a while it was down to 4 – 5 offers that agents were competing, with but in the last week we are back up to double digits in the area and huge $$ amounts over asking. It seems that inventory should be loosening up in March as evidenced by the number of listings in the office that should be ready for market, but only time will tell if it is enough to satisfy the number of buyers out there. Sales in the Lamorinda market have been steady in the past couple of weeks. In the Pleasanton area, certain homes will get multiple offers if they are desirable properties. Our Walnut Creek office is still seeing a very low inventory, and sellers are waiting to begin listing until February or March. However, sales are starting to pick up slightly.
Silicon Valley – Things are coming back to life, according to our Cupertino manager. There are crazy numbers of offers on popular properties. If buyers are worried about appraisals, they can forget buying in this immediate area. The Los Gatos Preview luxury market is improving steadily with some firming up in prices. Inventory in the San Jose Almaden neighborhood is increasing, as are sales. But even though inventory is up to 18 active single-family homes, that’s still eight less than this same time last year. In San Jose, the lack of inventory is really getting the year started with a bang. Multiple offers seems to be the norm in most price ranges under the $1M market. Buyers are eager to get back into the market, and open house activity is off the charts, according to our San Jose Main office manager. Open houses are very few and far between as most properties are selling prior to the weekends. With the holidays behind us, and the Super Bowl in front of us, the local Willow Glen market is cobbling up listings as soon as they come to market. The local inventory continues to contract each week as we move into the post-Super Bowl season. Agents are looking for new inventory to come to market, and they are back to the multiple offer / over bid / zero contingency offers. Open house traffic has been very busy at all price points we continue to see strong buyer demand. In Saratoga, the Previews luxury market is catching fire. Our local office just had an off market sale go under contract north of $5 million.
South County – This week, as the South County Association of Realtors gathered for its weekly meeting, an amazing phenomenon occurred. There were no sales to announce from the prior week. Out of over 150 agents present at the meeting, not one agent was able to announce a sale in which they participated. The one specific reason for this dramatic slowdown in the market is the lack of inventory to show potential buyers. For the last week of January, there were only 49 active listings for single-family homes in Morgan Hill and only 70 in Gilroy. Instead of agents recruiting potential buyers, they have shifted their focus to obtaining listings. The time to list is now and agents are working hard to get that message out to sellers. Agents are walking neighborhoods, door knocking and working hard to get the word out that it is definitely a seller’s market.
Santa Cruz County – 2014 is starting out with 16% fewer listings than this same time a year ago in the Santa Cruz area, and the fewest number of listings for the month of January for 18 years. At the beginning of the month there were 390 listings and 119 were under contract, which leaves about 271 active listings for buyers to choose from. Nearly 100 of those are priced over $1 million. Sales for December were in line with what they have been for the past few years at 138 transactions. The median price in December was $618,000, which was up 17% over the same month year over year. 35% of the sales in Santa Cruz County are under $500,000, which was the highest number since June. A less than three-month supply of homes for buyers is the lowest it has been at this time of year for nine years, and will continue holding back sales. There was a slight uptick in the number of closed transactions over $1 million, representing 12% of the total closed sales. This is a significant increase in closed deals in this segment of the market from the low of 4% a few years ago. While this segment slowly continues to improve, the recovery has been slow. Unfortunately home sales here and coastal communities everywhere have been adversely affected by the implementation of the new FEMA regulations, which went into effect in October 2013. The cost of flood certificates, surveys, increase in insurance premiums, mandatory flood insurance, if it’s even available, is causing deals to cancel. The cost of premiums is prohibitive, and in some cases not available at all and the maximum coverage available is $250,0000 no matter what the price of the home. If the Buyer pays cash for the property, the insurance requirement goes away, but in many cases there is no protection in the event of a flood for the homeowner.
Monterey Peninsula – This month continues to be strong for the local housing market, and agents are off to a great start for 2014. Our local office had two closings off MLS combined with all of the other sales, making January an incredible month for our agents. This week Tim Allen launched the first 16 vacant lots of the potential 90 lots in Pebble Beach, which were very well received and generated great feedback from local agents. Our local manager encourages any Bay Area agents that have clients looking to build a new estate home in Pebble Beach to contact Tim or himself for more details on this opportunity fronting Spyglass Hill Golf Course on an acre or more per lot. Next week the AT&T Golf tournament begins. This is the opportunity to show off some of the beautiful scenery and homes on the Monterey Peninsula. Agents are gearing up for increased traffic in our offices and we have increased our advertising and direct mail for launch of the lots and the event. Our manager is looking forward to a good February. Listings seem to be increasing but still on the light side for choices of inventory.