Low Inventory Preserves Sellers’ Market in Northern California
Northern California continues to experience a healthy sellers’ market with median and low priced properties and, in some areas, with reasonably priced luxury properties. Due to the limited inventory and high demand for median priced properties, most reasonably priced listings receive multiple offers above asking price.
According to the National Association of Realtors® (NAR), in March there was a 0.8 percent decline in the Pending Home Sales Index based on contract signings from February to March, but there was a 0.8 increase in the Pending Home Sales Index based on contract signings compared to March 2016.
“Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers,” said Lawrence Yun, NAR chief economist. “Buyers are showing resiliency given the challenging conditions. However, at some point—and the sooner the better—price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.”
Competition is high in most of Northern California because there is an abundance of buyers seeking affordable family homes, which are in low supply. Most open houses for new listings are seeing attendance as high as 50 people on weekends. The low inventory is also keeping some sellers from listing their property out of fear that it will sell before they are able to secure a new home.
According to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.), “Even with a strong performance in March closed escrow sales, a shortage of available homes and robust price growth that’s eating away at affordability stifled pending home sales for the third straight month.”
Unless inventory remains low, buyers may find some relief in the coming months as the Spring Market continues to bring new listings to the market in hopes of meeting the high demand.
Here’s what was happening in our local Northern California offices in late April:
East Bay – The year-over-year first quarter statistics for the East Bay area: Alameda saw its overall median sales price increase 4 percent from $818,500 to $849,500 reflected in a 6 percent leap in short sales and foreclosures from $935,000 to $990,000 and a 10 percent jump in condos and townhomes from $655,500 to $722,250. Oakland’s overall median increased from $550,000 to $625,000, representing a 14 percent increase. Short sales and foreclosures moved from $550,000 to $650,000, representing an 18 percent increase, and condos and townhomes moved from $556,144 to $561,254, representing a 1 percent increase. Berkeley now has an overall median price of $1,055,000, a 21 percent leap. Short sales and foreclosures grew from $901,000 to $1,100,000, showing a 22 percent increase. Condos and townhomes went from $565,900 to $762,500, increasing 35 percent. Albany grew from $733,000 to $870,000 — a 19 percent increase — with houses jumping from $848,888 to $975,750, a 15 percent increase, and condos and townhomes moving from $418,000 to $525,000, which is a 26 percent increase. El Cerrito also saw significant gains with the overall median moving from $740,000 to $885,000, representing a 20 percent increase, and short sales and foreclosures moving from $775,000 to $915,000. Inventory supply remains low with almost all areas reflecting a level of less than a one-month supply, thereby indicating that buyers will continue to outnumber the listings.
Monterey County – April is trending to close the month almost even with last year with the luxury price point seeing more of a slow down. The $1.5 million and under market is seeing a shortage in available properties. New buyers are coming from the Bay Area looking for that special property to spend some time in the Monterey Peninsula. Multi-residential investment properties are currently a hot category. Rents are at a record high, and cities such as Pacific Grove are most desirable for young families moving to the area. Additionally, the new Monterey County office is opening at 618 Lighthouse Ave in Pacific Grove, Calif.
North Bay – With only 187 active residential listings in Santa Rosa, the market is tightening again. Many homes are receiving multiple offers and time on market is decreasing. Open homes are busy, indicating that the buyers are here and are looking around hoping to find more sellers. Average days on market for March fell 14 percent from February. For Sonoma County wide, the number of new listings fell more than 10 percent in the first quarter. There is a lot of new inventory that came on to the luxury market. There was a 40 percent increase in listings in the luxury market from February to March. Pending sales increased by approximately 40 percent and closed sales for the first quarter this year compared to 2016 are up 31 percent. The market remains ultra-competitive in the lower middle to the upper middle price ranges. There are still more buyers than sellers. In the luxury end of the market, it is still competitive but there’s not quite the sense of urgency as in the lower price levels. Sebastopol is seeing an increase in available properties, but they are all going quickly. Because they have been priced out of the market, buyers are relocating from the Bay Area and are attending various open houses. The market is currently down 7 percent in listing inventory and 29 percent in sold listings compared to last year. However, the average sales price is up 17.04 percent. The Southern Marin office closed the highest price listing ever in Mill Valley at $7,200,000 and the highest price per square foot ever at $1,650 per square foot. The luxury market is strong. About 25 percent of homes listed over $2 million are under contract. This percentage typically runs between 10 percent and a max of 20 percent. The general market continues to experience a strong seller’s market. With 75 percent receiving multiple offers, this market will continue as is until there are more listings. In downtown San Mateo, listings are increasing and sales are getting stronger.
Sacramento County – There are many luxury listings. Overall, the market is bifurcated with listings under $450,000 experiencing a seller’s market and listings over $750,000 experiencing a buyer’s market.
San Francisco – The market continues to experience an abundance of buyers with too few listings. When a new property comes to market, the first open houses and broker tours are well attended. As is always the case, pricing remains critical. If the property is presented and priced well, multiple offers are the usual outcome. If not, the property sits and attendance trails off.
SF Peninsula –There is still low inventory and nearly every listing is receiving multiple offers and selling for more than the asking price. Open houses on the weekends are having more than 50 individuals attend. In the Half Moon Bay area, the average days on the market are 17 days, an active listing’s average price per square foot is $675, the pending contingent sale average price per square foot is $671 and the pending sale average price per square foot is $603. There are less multiple offers in Half Moon Bay Area. In the Menlo Park area, open houses are showing a slight slow down and turn out in some areas while other areas particularly in the lower price ranges of under $2 million are still experiencing very busy open houses. Well-priced homes are still selling quickly, typically in less then 10 days in many price ranges while homes that are not priced correctly tend to sit for up to 30 days, which is considered a long time. Many agents are using the 30 days as the point in time to suggest or ask for price reductions. In the Palo Alto area, activity has been very good for listings priced up to $4,000,000. They tend to receive multiple offers on every sale and have sales prices upwards of 20 percent over the list price. Entry-level inventory is very low, and there is more selection in the luxury price points.
Santa Cruz County– The luxury market is in need of supply because demand is still very high. Compared to 2016 there have been approximately just as many sales year-to-date, and inventory is just about the same. The average price of a home in Santa Cruz County is close to $900,000, which is close to the benchmark of what is generally considered to be a luxury property, so when reviewing statistics it is becoming necessary to consider homes closer to the $1.5 million plus range as being part of the luxury market. The inventory of single-family homes active on the market is steadily increasing and is currently at about 271. Historically, this is still quite low for this time of year, but there are approximately seven to eight homes being listed every day. The number of homes changing to contingent and pending status is approximately seven per day, so at this rate it will take time to build supply. Inventory is so low that some potential sellers are not listing their home due to the lack of availability for a replacement property.
Silicon Valley – In Cupertino, the luxury market is steady and open houses continue to be well attended. Some agents are having excellent success with preemptive offers. South County agents are reporting that it is not uncommon to have 20 to 30 groups walk thru an open house on either Saturday or Sunday. Even though inventory remains low, agents are reporting that they are not receiving as many offers, and the offers they have received have not been for the full listing price. In Los Altos, the luxury market — homes priced over $4.5 million — is steady, but multiple offers continue to be the exception as opposed to the rule. Overall, inventory levels are still very low compared to buyer demand. Currently, there is less than one month’s worth of inventory in Los Altos. With such a limited number of homes available for sale, most homes are receiving multiple offers, which typically leads to a sales price that is over asking. The market in Mountain View is even hotter with barely two weeks’ worth of inventory. The number of homes coming on the market for sale each week is slowly on the rise in both the Los Altos and Mountain View areas. However, these homes are being absorbed quickly and are selling very fast. Most homes coming on market are priced to induce offers and are selling in less than a week. The markets of Los Altos and Mountain View are still very strong and extremely robust.
South County – The luxury market is seeing a lot of inventory sit on the market, causing an excess of inventory in the luxury range. They are getting a few showings but no offers. In the below $500,000 market, there are multiple offers on most listings. Sellers are excited to receive higher offers but are less likely to agree to buyers’ requests for repairs and do not like giving extensions. Additionally, property lots are selling, but there is a shortage of new home construction.