California’s First Quarter Foreshadows Strong Sellers’ Market
As the first quarter of 2017 comes to a close, California continues to show an abundance of active buyers throughout its markets while dealing with consistently low inventory. Reasonably priced homes spend minimal days on the market, often having received multiple offers, while overpriced homes are taking longer to sell.
According to the National Association of Realtors® (NAR) Pending Home Sales Index, in February there was a 3.1 percent increase in the pending home sales index in the West, rising to 97.5, which is a 0.2 percent hike from last year.
“Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” said Lawrence Yun, NAR chief economist. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”
A healing economy continues to increase the number of new buyers nationally and locally, while low inventory decreases many buyers’ options and increases their competition.
“While it’s encouraging to kick off the year with back-to-back yearly sales increases, moving forward, California’s housing market could lose steam in the long term as the Fed begins to adjust the federal funds rate,” said C.A.R. President Geoff McIntosh. “In the short term, however, the specter of higher interest rates may push buyers off the fence to purchase a home before mortgage rates move even higher.”
Moving into the rest of 2017, the number of buyers will continue to rise at a faster rate than new listings. Cash offers will continue to be more successful and popular because they stand apart from the abundant offers most listings receive.
Here’s what was happening in our local Northern California offices in late March:
East Bay –As we approach the end of the first quarter, the market remains incredibly strong with low supply and high demand reflecting continued price increases throughout the East Bay. Sales activity has picked up this month with homes continuing to sell at a fast and furious pace. More of the homes for sale are receiving offers in the double digits, yet several homes listed for $1.5 million or above are taking a little longer to receive offers than those selling within 14 days or less. Buyers are still coming in to our market and are willing to pay well over the asking price to get a home with a yard, but still close to amenities. Preemptive offers now have agents publishing offer dates within a few days of the first open house.
Monterey County – The Monterey Peninsula market had shown signs of a slowdown at the beginning of the month but is seeing more activity at open houses. The under $1 million price point has been especially active. Affordability is always a factor on the Monterey Peninsula especially for first time buyers. New listings are incoming as homeowners prepare their properties after the storms. The month is slightly up in unit sales over March 2016 and even with dollar volume. The Monterey Peninsula continues to be one of the most desirable destinations on the central coast. The Carmel Chamber of Commerce Executive leadership committee reported that there were several repeat visitors that had been visiting the area for several years, and that there were seven home purchases that they knew from out of area visitors.
North Bay – A Tiburon listing of $2.3 million closed a million over list price. All levels are hot as inventory is still quite limited. Buyers are out en mass and ready to buy. There are approximately 300 available properties in Marin and only 60 are listed under $1 million and 15 are under $750,000. This price range is flying out the door, selling with multiple offers, waiving off contingencies and many in cash. One of our Mill Valley listings, which was a complete teardown, was listed at $725,000 on a busy street and received 13 offers, going well above list price. A property listed at $945,000 in Novato had hundreds of visitors over the weekend. There are indications that more units are getting ready to come on to the market in the near future. The market looks and feels remarkably similar to last year during this same period: low inventory, slightly less pending sales and less closings. The luxury market is stronger than it has been since the recovery began in 2011. We continue to experience a sellers’ market with multiple offers on most properties listed under $1,500,000. Overall, the market is getting better.
Placer County – Luxury sales for properties priced above $1,000,000 are down 17 percent from 2016 luxury sales. For 2017, there have been 38 luxury properties sold as compared to 46 sold last year for the same period. The median sales price for luxury properties in 2017 thus far is $1,500,000, which is down 3 percent from the median sales price of $1,550,000 in 2016. The average sale price of luxury homes year to date stands at $1,829,378 as compared to $2,504,941 in 2016 and is down almost 27 percent.
There continues to be considerable interest in the market as many buyers and savvy investors are actively looking for homes. For sellers, there is a demand for properties on the market because of the low inventory. For buyers, even though inventory is down from last year, there are quality properties to choose from throughout the north Lake Tahoe and Truckee areas. As spring approaches, more homes will be coming on the market and with the current home prices and favorable mortgage interest rates, real estate investors will be able to succeed in this market and acquire homes in many of the Lake Tahoe and Truckee resort communities.
Sacramento County – There is increasing inventory, which is causing the market to trend toward a buyers’ market. The bifurcated market under $500,000 is in great demand and has virtually no inventory. The over $750,000 inventory is now a buyers’ market.
San Francisco –There is still a high demand and few listings, but unrealistic price expectations will cause a property to stay on the market longer. There is more inventory and the patterns seem to be holding, but there are fewer home sales from February year over year. There is a lot of traffic, interest and offers up to about $2.5 million but anything higher is where activity appears to drop off. Condos have less traffic and frenzy with about half going at or under asking price. Buyer credits are becoming more common. Because there are still not enough listings for the amount of buyers, many properties continue to receive multiple offers on their offer dates. When something ratifies with only a single offer, it is because a savvy buyer made a pre-emptive cash offer or because it is a new construction condo. As is always true, properties that buyers view as over-priced continue to sit despite the lack of inventory.
SF Peninsula – The market is strong, and there is a lot of activity at open houses. Because of the low inventory and high demand, prices continue to rise due to multiple offers, and the market remains very competitive for buyers.
Santa Cruz County – Homes listed at more than $1 million in Santa Cruz are receiving offers if they are priced appropriately and are appealing. The luxury market is likely going to perform well this year with the affordable pricing for jumbo loans. The number of new listings coming to the market is less than the number of active listings changing to pending status. The overall listing inventory for single-family residences has decreased to below 200, which is lower than usual this time of year. It appears that there may be a surge of inventory pent up, which may hit the market after the tax-filing deadline.
Silicon Valley – The market is steady but needs more inventory. There were 16 offers on a small condo in Blossom Valley. There are many more listings coming on the market, meaning there finally seems to be more choices for potential buyers, but the number of homes for sale does not yet meet buyer demand. Prices, however, remain high and sellers are realizing that they can still get top dollar for their homes. Higher mortgage interest rates do not seem to have dampened buyer enthusiasm or willingness to pay full price for a home in South County. The luxury market (homes priced over $4.5 million) is steady but days on market and inventory are heading up slightly higher because frenzied bidding and multiple offers are the exception as opposed to the rule. As a result, the number of sales in this market is down. At first glance, inventory would appear to be abundant, however, with so few homes actually on the market, this number is more of a false negative. Overall, inventory is rebounding faster than in years past, albeit slow, but inventory levels are still low compared to buyer demand. Many of the homes that had been lingering on the market have either gone off the market or have been sold. Currently, we have only a little more than one months’ worth of inventory in Los Altos. With such a limited number of homes available for sale, we are seeing most homes receiving multiple offers that typically achieve a sales price that is over asking. The market in Mountain View is even hotter with barely two weeks’ worth of inventory. In short, the number of homes coming on the market for sale each week is on the rise in both the Los Altos and Mountain View markets. Although the number of homes coming on the market has risen and inventory levels have eased, homes are selling very fast, particularly if they are priced well, in some cases spending as little time as one week on the market. The markets of Los Altos and Mountain View are still very strong and robust.
South County – The market seems to be picking up from the last two months. Despite the increase in inventory, homes are selling fast.