The Bay Area housing market had its challenges in 2016, including low inventory of homes for sale, rising prices that challenged would-be buyers, and political uncertainty with the presidential election. But despite the headwinds, this turned out to be a fairly good year overall for our local housing market.
Many home sellers once again enjoyed strong gains in sale prices – albeit not quite as strong as 2015, but good nonetheless. The median sale price for single-family homes, condos and townhouses in the Bay Area through October (the latest data available) reached $767,000, up 7 percent from the same month a year ago, according to local MLS data analyzed by Coldwell Banker.
Strong buyer demand, a healthy local economy, and a continuing decline in the inventory of homes on the market all combined to make 2016 a seller’s market in the Bay Area for much of the year. The strong economy fueled demand for homes throughout the region, but especially in the more affordable markets in the East Bay, South Bay and North Bay areas.
The year saw a continuation of mortgage rates that remained near historic lows much of the year, helping make home purchases more affordable. But in recent weeks, key lending rates began to tick higher, which could present challenges to the market if that continues into the new year.
According to Freddie Mac, 30-year fixed rate mortgages in the U.S. averaged 3.94 percent in the week ended Nov. 17, up 40 basis points from its 2016 low. However, average rates are essentially flat from a year ago and below historical averages. During the height of the housing market in 2007, for example, the rate surpassed 6 percent.
Freddie Mac Chief Economist Sean Becketti in analyzing the recent bump in mortgage rates stated, “If rates stick at these levels, expect a final burst of home sales and refinances as ‘fence sitters’ try to beat further increases, then a marked slowdown in housing activity.”
One of the biggest challenges for the housing market in 2016 was insufficient listings to meet buyer demand. Although inventory has gradually improved in some areas, overall the number of homes for sale in October was down 6 percent from the year before and more than 11 percent from two years ago. The shortage of homes for sale continued to result in multiple offers for some properties, which resulted in sales for certain homes at above-list price.
Limited inventory for buyers to choose from may have also been one important reason why overall home sales in the Bay Area were slightly lower in 2016 than last year. As of October, sales year to date totaled 58,436, down 5 percent from the 61,626 sales during the same period in 2015.
Statewide, the California Association of REALTORS® (CAR®) expects existing, single-family home sales to reach 407,300 by yearend, virtually flat from the 408,800 transactions in 2015. CAR® also projects that the median sales price statewide will finish the year at $503,900, up 6.2 percent from last year.
CAR® Vice President and Chief Economist Leslie Appleton-Young said several key factors led to a healthy 2016 housing market statewide, and she expects those to continue next year. But she too has noted that there will also be some challenges.
“With the California economy continuing to outperform the nation, the demand for housing will remain robust even with supply and affordability constraints still very much in evidence,” she said. “The net result will be California’s housing market posting a modest increase in 2017.”
Appleton-Young added, “The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity.”
If you’ve been thinking about selling your home, now may be a good time to make your move. Mortgage rates are still low by historical standards, although that could change in the coming year if rates continue to rise. And for now, we’re still enjoying a seller’s market in many of our communities.
If you have questions about making a move, including what your home might be worth and what the market looks like in your neighborhood, I’d be happy to help. Please give me a call or e-mail me and we’ll get started today!