Bay Area Luxury Housing Market Remains Strong
On the heels of an outstanding 2013, the Bay Area’s luxury housing market is off to a good start in 2014.
The first month or two of any year is never enough time to draw conclusions about how the full year will turn out, but so far sales in the Coldwell Banker Previews International luxury segment of the market have posted solid year-over-year gains despite a serious lack of inventory.
Sales of homes over $1.5 million in Silicon Valley jumped 22 percent in January versus the same period a year ago. And uber luxury sales did even better. There were seven sales over $3 million last month, up from just two in January 2013.
Also encouraging – homes in the Valley sold faster on average (45 days), and sellers received a higher percentage of their asking price (105 percent) when compared to last year. Both of those are important signals of a market’s overall health.
In Marin County, sales over $1.5 million surged in January with 29 properties selling over that level, more than double the 14 luxury transactions in January 2013. Sales were off slightly from December, although it’s not unusual to have a drop from year-end closings.
Meanwhile, the median sale price of a luxury home in Marin County spiked to $3,075,000 from $2,179,400 a year ago. The big jump in median prices reflected a much greater number of ultra, high-end sales. There were 23 sales over $2 million last month, almost triple the number in January 2013.
And across the Bay, million-dollar sales in Alameda and Contra Costa counties climbed 17 percent in January with 90 high-end transactions compared to 77 the previous January.
We’ll have San Francisco’s first quarter luxury report out at the end of next month and it will be interesting to see if The City follows up on a very strong fourth quarter 2013.
The strong high-end sales figures so far this year are encouraging for the luxury market – and the overall Bay Area housing market – as we approach the traditional spring selling season. But the market still faces some challenges as the year unfolds.
We continue to struggle with far too little inventory to meet the strong buyer demand, which in the long run will slow sales gains. Gradually, we’re seeing some new listings come on the market with promises of more to follow in the weeks ahead. Only time will tell whether it will be enough.
Additionally, while this is still a strong seller’s market – make no mistake about that – agents in some areas have seen an ever-so-slight shift in the market. Properties are still getting multiple offers, just not quite as many per home as they had before. And many properties are still selling over the asking price, but perhaps not as wildly over.
All of this is to say that there are subtle signs that the frenzied seller’s market may be starting to come back into more balance. If so, that can only be good news in my mind as we move back to a healthier equilibrium between buyers and sellers.
Below is a market-by-market report from our local offices:
North Bay – The luxury market is much improved over last year, according to our Mill Valley downtown office manager. The rate of $3 million sales is going at approximately twice the rate in 2013. Our Southern Marin offices are exceeding last year’s sales of $2 million plus by more than 2 times. The demand for property continues to far exceed the supply, resulting in a multiple offer market in most price points. We are seeing a gradual increase in listings, which should help move the market toward a more balanced market, but we still have several months to go. Cash buyers are still 33% of the local market. Agents continue to see all cash, five-day close of escrows, and non-contingent offers on the most desirable properties. One Sunday open house in East San Rafael had over 200 visitors. There’s been very little inventory added this week, our local manager said.
It’s still quiet in Novato with agents looking for spring listings. Buyers are getting impatient. Our Petaluma manager says sales of homes over a million more than doubled from last year at this time. Attendance at open houses has been phenomenal. Every open house had 20 groups or more – one had 90 groups through. There have been a limited number of homes held open due to lack of inventory. Houses on the market are going contingent soon after they are available in the MLS.
San Francisco – Our Lombard office manager says listings of any sort remain golden. There are many frustrated buyers and some are dropping out of the market. One probate property went 45% over asking. This seller’s market is not for the faint-of-heart. Our Sunset office manager reports that the inventory level continues to be historically low and therefore it is affecting the number of sales. According to the agents, there is no shortage of buyers; there is just nothing to sell. As of February 26, according to the local MLS, there are only 161 single-family homes actively listed in San Francisco!
SF Peninsula – Our ever resourceful agents in Burlingame continue to find properties that are not on the MLS, and even those not for sale. They are creating inventory where there is a severe shortage and making the dream possible for their clients. Sellers are very aware of the need for more homes to sell, but they are debating ”where will I go” or thinking that prices will escalate more over the next 6 months so they are in a waiting mode to see which direction the market takes. Pre-emptive offers are prevailing quite often as buyers are really stepping up to get the attention of the sellers. The desirable properties in Menlo Park and Atherton are in huge demand There were 18 offers on a $1.4 million tear down in downtown Menlo Park on a 6,000 square foot lot, and it sold for $1.7 million. A $27 million property just closed in Atherton to a foreign national. Menlo Park is the new Atherton and Atherton is the new Hong Kong, our local manager quips. Our Redwood City office was involved in a recent transaction that had 35 offers. The property was listed in high $900,000 and sold for over $1,200,000. Some buyers are thinking it is time to take a break. In San Mateo area, listings are picking up and the number of multiple offers on a single property is declining. Woodside is starting to move with some good sales and good buyers.
East Bay – Not much has changed overall in the past few months in Berkeley. The market is still short of inventory, and agents are receiving and competing against multiple offers on most properties. Properties continue to go 6-30% over asking. Home inspectors, pest control inspectors and stagers are busy, so that is a good sign of more inventory coming soon. Fremont agents are still experiencing multiple offer situations due to low inventory. One listing in the $750K range had 15 offers – of which 3 were cash offers. Finally, there are six new listings on the market this week in the Oakland-Piedmont area, and agents are hoping this could be the start of the growing inventory. There is still a lot of attendance at open houses with many buyers coming over from the city. Ratified deals are still going over list price, some WAY over list price in most areas of Oakland and Berkeley. Pleasanton agents are still seeing multiple offers on homes under $1.5 million. Homes are coming on the market but inventory is still low.
Silicon Valley – Our Cupertino manager says the Previews luxury segment of the market is getting stronger, and the overall market would explode if only agents had more inventory. In Los Gatos, multiple offers and lack of inventory continue to be the hot topic. Properties priced at market value are continuing to receive multiple offers. In the San Jose Almaden area, multiple offers still going strong. Almaden SFR actives listings have finally exceeded 20, with 25 active listings as of this week. The local Willow Glen listing inventory is growing. For the first time since the new year agents saw a substantial weekly increase in listing inventory. There were a net nine new units for the week with just four pendings. Homes that show well and are move-in ready are still drawing a lot of attention with multiple offers well over the list price. Agents are experiencing a new trend in that market –multiple preemptive offers to the seller prior to an established offer date. The Saratoga market is gaining steam. Buyer confidence seems to be up as long as seller expectations are in line. Overall market inventory is up 44% in Saratoga and 60% in Cupertino/Sunnyvale since the first of the year. Inventory is still at an all-time low but certainly headed in the right direction.
South County – The supply and demand scenario continues in the South County. There is huge demand and very little supply. For first time buyers (under $450,000) there is just nothing to select from. “Move-up” buyers are very reluctant to list their homes for fear that they will not be able to secure a replacement property. Investors are equally as frustrated—as of yesterday there were only four multi-family properties for sale in both Gilroy and Morgan Hill. Agents seem to be pulling out all of the stops in trying to convince sellers that the time has never been better to list their homes. Many agents are going “back to basics”: door knocking, cold calling and sending out personal letters to entire neighborhoods. It would seem that it has never been more incumbent upon agents to “get the word out” that sellers can currently demand top dollar for their homes.
Santa Cruz County – The Santa Cruz region seems to be picking up steam. Listings and sales are growing. Agents are getting very busy and our local manager reports that the market is experiencing some multiple offers.
Monterey Peninsula – February sales and the median home sale price are trending up for the month with several new listings in contract over the last two weeks. The Monterey Peninsula inventory is still stronger than the Bay Area, which is an opportunity for out of area buyers to purchase their second or future retirement home. The under $500,000 purchase price continues to be a tight market for first time buyers in this area.