Offshore Buyers Continue to Invest in Bay Area Real Estate
2015 was another very strong year for foreign investment in U.S. real estate, especially here in the Bay Area and particularly from Asian buyers.
The dollar volume of all foreign investment in the U.S. reached $104 billion for the 12 months ended March 2015, up 13 percent from the same period a year ago, according to the National Association of REALTORS®. More than half of that investment went to California and three other states – Florida, Arizona and Texas.
No one knows for sure exactly how much foreign investment there is in the Bay Area housing market, but anecdotal evidence from our agents and managers in the field tell me it is substantial. And it’s probably not surprising, considering the fact that the Bay Area has long been one of the most sought after housing markets for Chinese investors and other offshore buyers.
International investors are attracted by the strength of our local economy, particularly the tech sector in Silicon Valley. They also favor the stability of the U.S. political and financial systems, our strong schools and world-class universities like Stanford and Cal, solid appreciation on homes in the Bay Area, and the relatively affordable prices – yes “affordable” – compared to many other major cities around the world.
If you have any doubt about just how fast Chinese and other Asian investment is growing in the U.S., consider a recent NAR study that found Chinese buyers were the number one international investors in U.S. real estate over the past year with $28.6 billion in sales volume, nearly three times the number two country, Canada. As recently as six years ago, Canadian investment in the U.S. market was more than double China’s, which also ranked behind India and the U.K. and was at the same level as Mexico.
In recent years, Coldwell Banker has deployed a very targeted marketing program to reach Asian consumers in a variety of media outlets, both print and digital. We are reaching out to buyers and marketing properties on many of the biggest Asian websites and publications. In addition, our strong international network of offices and agents – the most of any U.S. brokerage – has helped us attract more offshore buyers. Given the interest in the Bay Area housing market from Asian investors and others overseas, I don’t see that trend changing anytime soon.
Below is a market-by-market report from our local offices:
North Bay – While we are experiencing a seasonal slow down before the holidays, a modest 1,650 square foot property in Larkspur, listed at $1,425,000, went on the market last week, received 12 offers (three from our Greenbrae office.) The listing agent sent five multiple counter offers over $1.7 million and is contract with an all cash offer! The few new listings that have gone on recently are still receiving multiple offers. Our San Rafael manager says some new listings are coming on the market but it appears most sellers are holding off until the new year. Open house activity has been slower, probably due to the season. Homes that are listed for sale now are still selling. Our Santa Rosa Bicentennial office manager notes that inventory continues its winter decline. The number of new listings hitting the market in November was down 45% from the previous month in Sonoma County. Appreciation of median price from November of 2014 to November of 2015 stands right at 10%. The high-end market has seen a brief resurgence of buyer interest. Many high-end homes are receiving an abundance of showings, and properties going into escrow remain on a steady pace. Our Santa Rosa Mission office manager also says he’s seeing the typical holiday slowdown. Agents are less active in the office but the market is holding steady. In Sebastopol, agents have also experienced a very noticeable slowdown this period. Many buyers, sellers and agents have slowed down at the end of the year. There is still business being done but slow to be sure.
San Francisco – Our Lakeside office manager says inventory depletion is continuing and sales are steady. The number of multiple offer experiences is on the rise again but usually with fewer offers and occurring in probably less than half of the sales. Many associates are talking about listings that they thought would have sold right away but are not sold after 30 days on the market even though seemingly well priced. This appears to be a good time to pick up a property without competition for the alert Buyer and Agent.
SF Peninsula – Our Burlingame manager says there seems to be a slight slowdown in sales and listings taken due to the holidays. According to our Burlingame North manager, there were 112 Single Family Residence sales during this time period in 2015 compared to 103 sales in the same time period in 2014. The Median Sales Price of Single Family Residences was $1,350,000 compared to $975,000 during the same time period in 2014. There were 48 Condominium/Townhouse sales during this time period compared to 47 sales in the same time period in 2014. The Median Sales Price of Condominium/Townhouses was $725,000 compared to $681,000 during the same time period in 2014. Across the hill in Half Moon Bay, inventory continues to be decreasing. Open homes are very active. There are fewer multiple offers on listings. Open houses have been amazingly well attended in the Menlo Park area with “real buyers” according to the agents. Sales are harder to come by but some agents are exceedingly busy. There is lots of new construction coming on the market – old houses are coming down very fast in Menlo Park. They disappear overnight! Inventory is decreasing in the Palo Alto area, while demand remains strong. Our Redwood City-San Carlos manager says it’s an extremely slow time right now with a continued lack of inventory. Only if a property is priced right on, shows very well, and is in a perfect location does it now sell quickly. In San Mateo, the market is slowing down. The holiday season has begun. The quiet Holiday Market is upon us in the Woodside and Portola Valley area, but our manager says she expects good things are coming in the New Year.
East Bay – The Berkeley area housing market does not seem to be slowing down. Our Berkeley office is busy going into the holidays. Although a few properties have sold for the list price, most are still selling over asking. Overbidding might get worse over the holidays as fewer and fewer homes come onto the market. Agents are encouraging sellers to put their homes on now instead of waiting. The demand is still strong as San Francisco buyers are still flooding into the East Bay.
Silicon Valley – Fewer properties went pending last week, but open houses were packed, reports our Cupertino manager. Are the holidays starting earlier and earlier? Our San Jose Almaden manager says the holiday slowdown as far as inventory has started. There are 998 units (SFR & C/T) available for sale in Santa Clara County. Multiple offers are still the norm though. Almaden is flat on units sold compared to last month and this time last year. Prices are up 5.8% for the month over last year. Blossom Valley is flat as well over last month and last year in units sold. The prices are up 8.9% from last year for the month. Cambrian is down 30% in units sold from last month and flat in units sold over last year. Prices in Cambrian are up 6.6% from last year. So fewer units available, same number of units sold and prices are remaining strong.
South County – It seems that in South County November arrived and all of a sudden Real Estate activity came to a screeching halt, according to our local manager. Listings are down dramatically and with the lack of inventory, sales have declined accordingly. As of December 1 there were fewer than 100 active listings in all of Morgan Hill, Gilroy and San Martin. Of course, a slowdown always comes with the Holiday Season, and many agents (as well as clients) are taking a “breather” from the frenetic market that existed at the beginning of the year. The fact remains, however, that demand remains high and that as the first of the year arrives, the market will regain its momentum and energy.
Santa Cruz County – Inventory has been approximately 20% less than 2014 for the majority of 2015, meanwhile, sales volume in 2015 has been as much 20% higher than 2014. As of the completion of November 2015, inventory has stayed approximately 20% lower than 2014, however the number of sales were exactly on par with November 2014. Our associates have been very busy in our offices showing property, preparing contracts, and responding to consumer inquiries, which leads our local manager to believe that we will see a decent amount of sales volume through the winter. The Previews Market has been strong all year long, and November was no exception. Inventory was low compared to 2014 for the first half of 2015. However inventory has increased to a level that exceeds last year in the past several months. The number of sales has been higher than 2014 for the majority of this year and is currently up by 25%.
Monterey Peninsula – The holiday season is upon us, but the buyers are still on the lookout for that property to suit their needs. New inventory to the Peninsula market continues to be less than the past. It seems that the sellers are concerned with finding their replacement property. We have seen more contingency sales than the past. This month in our offices there were three that successfully closed concurrently. We have closed several TRID loans this month with only a few extra days and most seemed to close smoothly. We look forward to closing out 2015 and are preparing for the New Year.