Glen’s SF East Bay Real Estate Market Update – April 30, 2019

April 30, 2019 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here are some highlights for the 38 East Bay Cities that I track:

Affordability, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

People really want to leave the Bay Area, claims every survey.

Although several reports indicate the housing market is projected to heat up this spring, recent data from Trulia suggests the industry is currently experiencing the early stages of a cyclical downturn.

Mortgage rates have dropped significantly as of late, with the 30-year fixed coming in at an average of 4.08% this week.

 

  • Here’s where we stand as of the end of April. Typically, we see a dramatic drop in inventory during December followed by a modest steady increase in Spring. Inventory has increased by 65%, now sitting at a 45 day supply of homes for sale, (However, this is much higher in comparison to last year’s end of April of a 30 day supply). Pendings increased with new inventory coming onto the market, but it still lags slightly behind last year by 3.4%. The pending/active ratio increased slightly to .92, still below our neutral mark. However, our ratio last year at the end of March was a very strong (seller’s) 1.39. This is quite a difference. This is the 10th month in a row that the ratio has fallen below 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers. A number below 1 favors buyers. In short, we have moved from a strong seller’s market since the beginning of last summer towards a more normal and balanced market, and in many cases, now favoring buyers.

 

  • The percentage of homes “sitting” has come down slightly to 35% of the homes listed now remaining active for 30 days or longer, while 17% have stayed on the market for 60 days or longer. This improvement is usually due to the number of New homes that were listed in Spring. Still there are more homes “sitting” this year as compared to last year, (with then 26% remaining active over 30 days and 13% remaining active over 60 days).

 

  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

  • The month’s supply for the combined 39 city area is 45 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 30 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,915 homes actively for sale. This is higher than last year at this time, of 2.013 or (44.8% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased to 2,695, less than what we saw last year at this time of 2,790, or 3.4% lower.

  • Our Pending/Active Ratio is .92. Last year at this time it was 1.39.

 

  • Sales over the last 3 months, on average, are 2.8% over the asking price for this area, lower than what we saw last year at this time, of 6.2%.

 

Recent News

Walking Away with $1 Million

California’s soaring home values give some homeowners a million new reasons to join the Bay Area Exodus

By Mark Calvey,| SAN FRANCISCO BUSINESS TIMES, May 2 2019

Skyrocketing house prices have made millionaires out of many Bay Area homeowners. Now they want to start living like it.

They are selling properties here and moving to cities where typical homes can sell for up to $1 million less than in pricier parts of the Bay Area. A small but growing ecosystem of real estate professionals has sprung up to serve them.

San Ramon real estate agent Scott Fuller, who started a website, LeavingtheBayArea.com, last year, has helped homeowners depart to Florida, Reno and Henderson, Nev. and Boise, Idaho, in addition to traditional hotspots for exiting Californians such as Portland and Seattle.

“For families who bought at the right time, 2010 or 2011, they’re now sitting on substantial equity. The equity has put them in a position so they have choices,” Fuller said.

Indeed, the median value of a home in San Francisco has nearly doubled in the last decade, rising from $716,000 in January 2010 to $1.36 million in February, according to Zillow.

Median prices have surged to well above $1 million in much of the rest of the Bay Area as well, including the cities of San Jose and Berkeley, and the counties of San Mateo and Marin.

While that high cost of housing is blamed for forcing thousands of people out of the Bay Area, it’s also created large paper gains for longtime owners — and an added incentive to cash out and go.

California has led the nation in outmigration, with departures exceeding arrivals by more than 100,000 each of the last three years.

To a large extent, this exodus is a story of shifting demographics as better-paid, well-educated relative newcomers take the place of those who head to lower-priced cities. Among those with college or graduate degrees, more are arriving in California than leaving it, census data shows.

Meanwhile, Bay Area home-buying demand is expected to get an additional boost as IPO proceeds at Uber, Lyft, Pinterest, Slack and other Bay Area growth companies start to flow into the housing market.

Still, those making their way to the exits say other byproducts of the Bay Area’s success — such as traffic congestion and high taxes — have also spurred them to make the move.

Recent surveys by the Bay Area Council and Silicon Valley Leadership Group have found almost half those surveyed are thinking of leaving the Bay Area in the next few years. Among millennials, it’s well above 50 percent.

It’s a potent pitch for out-migration specialists like Fuller.

“You can go to places like Phoenix, Reno, Las Vegas and a lot of areas in Texas, primarily Austin and Dallas,” Fuller said. “In those areas you can buy a nice home for $300,000 to $400,000.”

A rally in Raleigh

Real estate agents in California and Raleigh say the North Carolina city is an increasingly popular destination.

“I’m seeing a lot of people from California looking to retire here,” said Lynn Johnson, a broker at brokerage firm My Southern View, based in the Raleigh suburb of Garner.

Some are not just moving their homes, they are using their Bay Area gains to invest in other real estate as well.

Silicon Valley real estate investor and brokerage owner Myron Von Raesfeld is a case in point. The CEO of Santa Clara-based Windermere Silicon Valley said he recently sold a duplex in Santa Clara and bought several properties in the Raleigh area now worth about about $7.5 million.

“Raleigh-Durham reminds me of Silicon Valley in the 1970s and ’80s,” Von Raesfeld said. He points to the Raleigh area’s three large universities anchoring the region’s Research Triangle Park as big draws for both students and tech employers, including Cisco Systems, IBM and GlaxoSmithKline.

Von Raesfeld, who says Raleigh will become his primary residence this year, said he’s helped sell so many properties in the Raleigh area to Californians that’s he’s among the region’s top realtors.

He’s also working on selling Raleigh to his six adult children as he tries to convince them to leave the Bay Area for North Carolina. He says he may shutter his property management company in Santa Clara if his 30-year-old son Jason, who runs the business, agrees to move to Raleigh and set up shop there.

Investor appetite in Raleigh has helped fuel a 6 percent gain in the median home price over the past year — but it’s still only $272,800.

“Investors in Raleigh who once focused on homes selling for $130,000 to $150,000 are now buying properties for $225,000,” said Johnson at My Southern View, which features beehives on the roof to attract visitors to the office.

Vanessa Bergmark, CEO of Oakland-based Red Oak Realty, expects a Bay Area exodus may just be getting started.

“There are some major issues in California that could put a dampening on the future of the state, where residents and opportunities and companies and innovation will leave. That’s our biggest worry,” Bergmark told a San Francisco business audience last fall. “Watch what you invest in because the opportunities that we think exist because they once did, may not be the ones happening here. They’ll probably happen out of state.”

Fuller said he spends part of his time fielding calls from Boise, Idaho, and other cities that see the Bay Area exodus as an economic development opportunity, especially when it comes to Californians moving in with pockets full of cash. (That could explain why Boise has enjoyed one of the highest rates of home price appreciation in the past year — 18 percent, according to Zillow.)

“A lot of people that work for the cities are trying to recruit people to move in,” Fuller said, “They call to say, ‘We’d love to talk to you about how we can help you tell people what it’s like to live here.’

“I’m getting more and more of those calls,” Fuller said. “These cities are actually very aggressive.”

Bay Area median home price drops for first time in 7 years

Kathleen Pender, San Francisco Chronicle, April 29, 2019 

Bay Area home prices fell last month on a year-over-year basis for the first time in seven years, according to a report Monday from research firm CoreLogic.

The median price paid for a new or existing home or condo in the nine counties was $830,000 in March, up 7.8 percent from February but down 0.1 percent from March of last year.

The last time prices fell year over year was in March 2012. After that, they rose for 83 consecutive months, often in the double digits for long stretches of time. In March of last year, the median price was up a whopping 16.2 percent over March 2016. After that, the appreciation rate slowed down, but was still positive through February.

“It’s not that surprising that we hit the wall, at least in terms of a pause,” said CoreLogic analyst Andrew LePage.

Home sales and prices typically pick up between February and March as buyers position themselves to move over the summer. And they did this year, “but not as strong as last year,” said Glen Bell, a broker with Better Homes and Gardens Reliance Partners in the East Bay.

“It’s not like the sky is falling,” he said. “We are going through a gradual move from a hot seller’s market to a more balanced market. There are fewer offers, properties are staying on the market longer, you see price reductions and sales have been coming down.”

Santa Clara County saw the biggest year-over-year decline, falling 10 percent to $1.08 million. But it was also the hottest market in the Bay Area, if not the nation, in the first part of last year.

“We’ve definitely seen some softness and some slowing,” said Michael Repka, chief executive and general counsel of DeLeon Realty in Palo Alto. One of the main reasons, he said, is the change in federal tax law.

Starting last year, the federal deduction for all state and local taxes combined was capped at $10,000. In Silicon Valley, many homeowners pay more than $10,000 in state income taxes alone, meaning they get no deduction for property taxes, which can reach into the tens of thousands of dollars on newly purchased homes.

That didn’t seem to matter much in the first part of last year. “People didn’t grasp how bad it was until they did their taxes,” said Repka.

The number of homes sold in the Bay Area last month hit 6,124, up 39.4 percent from February, but down 14.8 percent year over year, CoreLogic reported.

The home sales and prices recorded in March “mainly reflect buyer purchasing decisions in February,” LePage said in a press release. In February, the market was recovering from the partial government shutdown, the stock market was on the mend and mortgage rates were dropping.

Since the end of February, the stock market has gone even higher, mortgage rates have gone lower and a trio of big Bay Area companies — Lyft, Pinterest and Zoom Video Communications — have gone public, with more to come.

The next two months will likely clarify whether many buyers who stepped out of the market last year — when prices hit an all time high of $875,000 in May and June — can be lured back in with lower mortgage rates, lower prices and IPO cash — or whether something more fundamental is going on.

Census data released this month showed that the Bay Area’s estimated population growth over the past two years slowed dramatically compared with the previous six, and the region’s astronomical housing prices are at least partly to blame. In Sonoma, Napa and Marin counties, the population dropped over the past two years ending July 1, as the fires left many people homeless.

Jason Nelson, an agent with Alain Pinel/Compass in Mill Valley, said that in Southern Marin, “there might be some slowdown in the market especially on the higher end. For well-priced homes that have what people are looking for — finish level, location, uniqueness — they are still going for over asking with multiple offers in short on-market dates.”

“The houses staying on the market are at prices that the marketplace just can’t bear. People say this house went for $2 million so my house must go for $2 million, but it has different views, different amenities.”

In Alameda and Contra Costa counties, the inventory of homes is almost twice what it was last year, Bell said. At the end of March, there was a 39-day supply of homes on the market, meaning that if homes sold at the same rate they’d been selling over the past 12 months, it would take 39 days to sell them all. At the same time last year, there was a 24-day supply. With that kind of supply increase, “you think there would be an increase in sales. We are not seeing that.”

In cities still “fairly hot,” such as Berkeley, Albany, El Cerrito, Alameda and parts of Oakland, many homes are still selling at prices above asking. “We’re seeing more weakness in west and central Costa Costa County.”

But in general, he said, most homes are selling for list price, or a little above or below. In other words, a more normal market.

America’s 10 Fastest-Gentrifying Neighborhoods

By Lance Lambert | Realtor.com, Apr 15, 2019

When it comes to real estate, gentrification might just be the touchiest subject of all. In search of reasonable housing prices, short commutes, and the tantalizing prospect of a kick-ass return on investment, professionals are moving en masse into lower-income neighborhoods. But while these newcomers often rehab old and vacant homes and bring a rush of investment to the community, many long-term residents and business owners don’t get to experience the booms—they get priced out of the very neighborhoods they helped build.

Still, the tsunami of gentrification, having utterly transformed some of the biggest cities on each coast (hello, New York and San Fransisco!), continues to wash over the nation, an inexorable force. Accelerated by sky-high rents and home prices as well as a wave of urban renewal, it’s now hitting previously overlooked neighborhoods. For home buyers, it’s an opportunity—and a challenge. Those who time it right and buy homes in places on the early cusp of gentrification can get in cheaply, and be assured of a big windfall down the road.

So the realtor.com® data team set out to find the fastest-gentrifying neighborhoods in the U.S. We wanted to identify the places on the upswing now.

“Neighborhoods that are well located, with public services and transportation that were originally built for the middle class, are the ones more likely to be gentrified,” says Phillip Clay, professor emeritus at the Massachusetts Institute of Technology and author of “Neighborhood Renewal: Middle-Class Resettlement and Incumbent Upgrading in American Neighborhoods.”

The neighborhoods gentrifying the fastest today are still in big cities, but they’re mostly secondary markets with room to grow, packed with affordable historic homes, and usually located near overpriced urban hot spots.

Clay takes an unvarnished view of urban gentrification: “Vacant land is developed,” he says. “That’s an active gain for the city. And commercial activity increases.” But with it comes higher prices all around.

“For longtime residents, the only people who are winners are those who are in a position of cashing out,” he adds.

To find the fastest-gentrifying neighborhoods, we looked at lower-income ZIP codes in America’s 100 largest cities. We excluded ZIPs that were more expensive than their city’s median sale price back in 2012 as well as those with few home sales in the years we measured. Then we created our ranking based on the changes in the following metrics from 2012 to 2017:

  • Change in median household income
  • Change in median home sale price
  • Change in the share of residents over 25 with a bachelor’s degree or higher
  • Change in the share of residents over 25 with a master’s degree or higher
  • Change in median home listing price on realtor.com*

We limited the ranking to just one ZIP code per city. Got it? Let’s take a tour of some places that are changing fast.

6. Uptown (Oakland, CA)

ZIP code: 94612
Median list price: $695,100
5-year median sale price change: +128.2%
5-year median household income change: +63%
5-year change in the share with bachelor’s or higher degree: +26.3%

Even six-figure-income families can feel poor in San Francisco. That’s why many are heading to across the bay to Oakland, the formerly crime-riddled community in the East Bay. In recent years the Uptown neighborhood has become the city’s entertainment hub, anchored by the overhauled Paramount Theatre, an art deco building that’s now home to Oakland East Bay Symphony, the Oakland Ballet, and dozens of other live performances each year.

“People start to ask themselves, ‘Do I want to spend $3 million for a townhouse, or do I want to spend one-tenth of that and still be a commutable distance to my job?’” says Chunlei Liu, a real estate agent with Climb Real Estate.

In 2012, the median home price in Uptown was $315,000. Now, the cheapest abode on the market is a 600-square-feet, one-bedroom condo priced at $499,000.

“We have a lot of properties that were neglected for a long period of time. When developers or even investors come in and make upgrades on those properties and pay the property taxes, it makes the city better,” says Liu. But “there’s definitely community blowback. … People can’t afford to live in the neighborhoods where they once were.”

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net


Posted on May 12, 2019 at 11:45 pm
Glen Bell | Posted in Uncategorized |

Glen’s SF East Bay Real Estate Market Update – March 31, 2019

March 31, 2019 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here are some highlights for the 38 East Bay Cities that I track:

Affordability, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

People really want to leave the Bay Area, claims every survey.

Although several reports indicate the housing market is projected to heat up this spring, recent data from Trulia suggests the industry is currently experiencing the early stages of a cyclical downturn.

Mortgage rates have dropped significantly as of late, with the 30-year fixed coming in at an average of 4.08% this week.

 

  • Here’s where we stand as of the end of March. Typically, we see a dramatic drop in inventory during December followed by a modest steady increase in Spring. Inventory has increased by 44.5%, now sitting at a 39 day supply of homes for sale, (However, this is much higher in comparison to last year’s end of March of a 24 day supply). Pendings increased with new inventory coming onto the market, but it still lags behind last year by 9.2%. The pending/active ratio increased slightly to .95, still below our neutral mark. However, our ratio last year at the end of March was a very strong (seller’s) 1.62. This is quite a difference. This is the ninth month in a row that the ratio has fallen below 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers as has been the case now for quite some time. A number below 1 favors buyers. In short, we have moved from a strong seller’s market since the beginning of last summer towards a more normal and balanced market, and in many cases, now favoring buyers.

 

  • The percentage of homes “sitting” has come down slightly to 38% of the homes listed now remaining active for 30 days or longer, while 17% have stayed on the market for 60 days or longer. This improvement is usually due to the number of New homes that were listed in Spring. Still there are more homes “sitting” this year as compared to last year, (with then 31% remaining active over 30 days and 14% remaining active over 60 days).

 

  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

 

  • The month’s supply for the combined 39 city area is 39 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 24 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,550 homes actively for sale. This is higher than last year at this time, of 1,1,623 or (57.1% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased to 2,414, less than what we saw last year at this time of 2,634, or 9.2% lower.

  • Our Pending/Active Ratio is .95. Last year at this time it was 1.62.

 

  • Sales over the last 3 months, on average, are 1.9% over the asking price for this area, lower than what we saw last year at this time, of 5.3%.

 

Recent News

Low mortgage rates won’t heat up the housing market, analysts say

Instead, the slowing economy will trample homebuyer confidence and home-price growth will fall

By Jessica Guerin, Housingwire, April 5, 2019

Mortgage rates have dropped significantly as of late, with the 30-year fixed coming in at an average of 4.08% this week.

The development has spurred activity in purchase mortgage applications as homebuyers act now to take advantage of the low rates while they’re here.

But analysts at Capital Economics warn against getting too excited about the possibility that low rates will heat up the housing market.

“Mortgage interest rates have dropped sharply since the end of last year, and the 30-year fixed rate is set to fall to 4.2% by the end of 2019,” analysts wrote. “But that won’t spur a significant rise in housing market activity.”

Why?

Blame the slowing economy.

“That will hit homebuyer confidence, and with inventory levels still low that implies existing home sales will do no more than tread water over the next year or so,” the analysts wrote.

Tempered housing demand will cause home prices to continue to slow, the group said.

Prices slowed to 5% in 2018, and Capital Economics predicts they’ll land around 2% by year’s end and close out 2020 at 0%.

But things will look up from there.

“An improving economy, coupled with low interest rates, will lead to a resumption in growth 2021, and we expect a rise of around 3%.”

The group also predicts that mortgage rates will end up around 4.2% by late 2019.

But as the economy’s slowdown begins to right itself in 2020, mortgage rates will again creep upward, the analysists predicted, with the 30-year fixed landing around 4.7% at the end of 2021.

But while the housing market won’t exactly see the flurry of activity some had hoped for, Capital Economics said that new home sales will find some support this year in the shift toward building cheaper starter homes, which are currently in short supply.

“Lower lumber prices will support a shift to cheaper homes and, alongside upbeat homebuilder sentiment and the relatively bright outlook for new home sales,” the group wrote, “that should enable a decent rise in single-family housing starts over the next couple of years.”

Trulia: This is how spring’s housing market will fare

Trulia says the market is in the early stages of a cyclical downturn

By Alcynna Lloyd, Housingwire, April 3, 2019

Although several reports indicate the housing market is projected to heat up this spring, recent data from Trulia suggests the industry is currently experiencing the early stages of a cyclical downturn.

“Cyclical housing market downturns occur roughly every 10 years, and they typically don’t happen overnight. Instead, they play out steadily over a few years, first showing up in sales volumes and later—usually a year or two later—in prices,” Trulia writes. “The housing market currently appears to be in the early stages of such a downturn: declining sale volumes and other market indicators indicate that it is cooling off, gradually pivoting away from the heated sellers’ market of recent years.”

And Trulia is right, home prices have been steadily depreciating since early 2018.

In fact, a recent report from CoreLogic indicates that since peaking at 6.6% growth in April 2018, home-price growth has continued to slow down.

However, despite these concerns, Trulia believes the housing market still has the ability to come out on top.

“The downturn we’re entering is inherently different from the previous one that saw home values plummet over 40%, and is likely to be mild,” Trulia writes. “Declining sale volumes will probably be followed by small declines in prices or possibly just a prolonged period of flat-to-modest housing price growth.”

As home prices continue to depreciate, Trulia predicts the housing market will shift in the favor of homebuyers.

“Sellers should expect price cuts to be more common, and properties will likely take longer to sell, causing inventory to build up,” Trulia writes. “More inventory, in particular, will slowly ease the competition between buyers, allowing them to negotiate with this spring’s sellers a shade more confidently.”

So, how will the housing market fare overall this spring? Well, Trulia says – just fine.

“There almost certainly won’t be a steep drop-off in home values like the one that occurred a decade ago, though the unfolding slowdown will be more palpable in some pricey markets,” Trulia writes. “Instead, any cooling in appreciation is likely to be moderate and happen gradually – likely showing up as either an extended period of flatter home price growth, or as a modest price decrease in the next couple of years.

People really want to leave the Bay Area, claims every survey

For years, pollsters have said San Franciscans are spoiling to leave—and it’s all starting to sound the same

By Adam Brinklow, Curbed, Mar 27, 2019

It happened again.

The Silicon Valley Leadership Group and Bay Area News Group released the results of a new survey of Bay Area voters this week. Among its findings: many residents say they want to leave the area in the near future.

This corresponds to roughly several years of similar public polling results, which detail discontent among the broad Bay Area public.

In fact, results like this have become so common since the start of the second tech boom and the beginning of the housing crisis that it has almost achieved meme-like levels, with each new survey bringing a distinct sense of deja vu.

To help keep it all straight, here’s what polling numbers published since 2018 say:

  • In the latest outing, a poll of 1,568 registered voters in San Francisco, Alameda, Contra Costa, Santa Clara, and San Mateo counties conducted by the Silicon Valley Leadership Group for Bay Area News Group found that 44 percent of those asked say they plan to leave the region, “but only six percent say they have definite plans to leave in 2019.” Of those polled, 60 percent cited housing costs as the reason most likely to drive them away, with “cost of living overall” the second most likely rationale at 57 percent.
  • Online real estate company Redfin posts quarterly “migration reports” every few months, estimating how many of its users are shopping for homes in other cities and ranking which metros have the highest likely “outflow.” Ever since Redfin began this tally, San Francisco (a term Redfin applies to the Bay Area as a whole) has ranked in the No. 1 spot, most recently with 23.8 percent of SF users browsing out-of-town locales. The most likely destination is Sacramento—also a persistent trend for years. But as Curbed SF noted before, it’s impossible to tell how many SF Redfin users actually take the plunge, go into escrow, and leave.
  • In February, Chicago-based public relations firm Edelman released its annual Trust Barometer for California, which surveyed 1,500 California residents, including 500 from the Bay Area. Of those asked, 53 percent of Californians say they are considering leaving the state, including 50 percent of Bay Area residents. Tellingly, among Bay Area millennials, the total was 66 percent. For residents with children (under 18 years of age), the figure was 63 percent.
  • Also in February, regional think tank Joint Venture Silicon Valley released its annual Silicon Valley Index and found that “for the third year in a row, people are moving out of Silicon Valley nearly as quickly as they are moving in.”
  • In August of 2018, Washington DC-based non-profit the Public Religion Research Institute surveyed 3,300 Californians and found that 64 percent of residents statewide would advise out-of-towners to move to some other state. However, in a surprise bit of optimism, 55 percent of Bay Area residents said they would tell others to come to California for opportunities despite the gloomy attitudes of neighboring regions.
  • In June of last year, the Bay Area Council, a business-sponsored public policy advocacy group, released results of its annual survey of 1,000 Bay Area households, including 120 from SF. In those results, 46 percent of respondents said they were “likely to move out of the Bay Area in the next few years.” For the 2017 survey, that same figure was just 40 percent. One year prior, the number was 36 percent. The high cost of housing was the most commonly cited complaint about the region.
  • In February 2018, another Edelman poll found that 49 percent of 500 Bay Area residents questioned agreed with this statement: “I am considering moving away from California because of the high cost of living.”

And that’s just in the past year; polling stretching back through previous years shows a persistent trend toward pessimism, housing anxiety, and speculation about abandoning San Francisco, the Bay Area, and the entire state of California.

Despite denizens’ desires to vacate the area, San Francisco’s population continues to grow, although growth has slowed significantly in recent years.

The top 10 commuter cities if you work in SF: Did your city make the cut?

By ERIN BALDASSARI, Bay Area News Group, April 4, 2019

Do you work in San Francisco but can’t afford to live there? If so, you’re like more than 250,000 other people who schlep into the city and back five days a week.

But where to schlep from? A new study by PropertyShark factored in travel times, median home prices, school quality and crime rate and came up with a list of the 10 best places to live if you commute into the region’s biggest job center.

South San Francisco, the study found, topped the list, followed by San Bruno and San Rafael.

The study only considered cities with 30,000 or more residents that were located within a 20-mile radius of San Francisco. Commute times were given the most weight in the analysis — 40 percent of the total score — followed by median home prices at 30 percent, and school ratings and crime statistics at 15 percent each, said Patrick McGregor, the lead researcher on the study for PropertyShark.

To evaluate commute times, the researchers used averages from the 2017 American Community Survey, part of the U.S. Census, as well as the driving time from each city to San Francisco as calculated by online tools like Google Maps.

Other factors that might influence where people purchase homes, such as the availability of single-family homes or the prevalence of public transit, were not included, McGregor said.

Balancing commute times and home prices, however, led to some surprising results, like San Leandro coming in at No. 10 on the list, McGregor said. Of the cities included in the study, San Leandro was one of the furthest from San Francisco, he said, but lower average home prices helped pull it up in the rankings.

For McGregor, whose employer is based in New York, there was something else surprising about the disparities among Bay Area cities.

“We knew San Francisco was going to be more expensive than the rest of the region,” he said. “We didn’t expect to see how much more expensive it was.”

But we didn’t need an East Coaster to tell us that.

Are in-law units the secret solution to the state’s housing shortage?

By Matt Levin, CALMatters, April 4, 2019

California lawmakers have pitched dozens of bold, high-profile solutions to California’s affordable housing shortage: billion dollar affordable-housing bonds, revamping the state’s signature environmental protection law, suing NIMBY-inclined cities into permitting more development.

But for all the big-picture housing legislation that has actually become law over the past few years, the solution that’s proved most immediately effective at providing new housing has been rather small in size: Accessory Dwelling Units, colloquially known as in-law units or granny flats.

Primarily as a result of new state laws that make it easier and cheaper to convert garages into living spaces or to build a backyard “casita,” these units have exploded in popularity in many California cities. Los Angeles received 25 times as many applications to build them in 2017 than it did the previous two years; Oakland, San Francisco and San Jose also have seen major jumps. The backyard units, which are typically around 500 square feet and have a bathroom and kitchen, are especially popular among older California families looking to downsize and rent out their main property. Estimates for the cost of constructing the units vary from builder to builder and city to city, but one survey found an average cost of $156,000 for builders of Accessory Dwelling Units in the Pacific Northwest.

“Now we’re finding dad has died, mom’s there by herself, and all the kids are gone, and they don’t need that big a house,” said state Sen. Bob  Wieckowski, Democrat from Fremont, who co-authored legislation in 2016 and 2017 to ease the costs and regulatory hurdles to building such units. Wieckowsi is at it again this year, and predicts that the state could create up to a million new homes with these accessory units, assuming some important regulatory tweaks.

On this episode of “Gimme Shelter: The California Housing Crisis Podcast,” CALmatters’ Matt Levin and the Los Angeles Times’ Liam Dillon discuss the promise of in-law units as a solution to the state’s housing crisis. They interview Sen. Wieckowski and builder Stan Acton of Acton ADU.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net


Posted on April 15, 2019 at 9:21 pm
Glen Bell | Posted in Uncategorized |

Glen’s SF East Bay Real Estate Market Update – February 28, 2019

 

February 28, 2019 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here are some highlights for the 38 East Bay Cities that I track:

Affordability, rising interest rates, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

 

  • Here’s where we stand as of the end of February. Typically, we see a dramatic drop in inventory during December followed by a modest increase in January and February. Inventory has increased by 34.4%, now sitting at a 36 day supply of homes for sale, (However, this is much higher in comparison to last year’s end of February of a 21 day supply). Pendings increased slightly, however, we are now 9.1% lower as compared to last year. The pending/active ratio increased slightly to .85, still below our neutral mark. However, our ratio last year at the end of February was 1.44. This is quite a difference. This is the eighth month in a row that the ratio falls under 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers as has been the case now for quite some time. A number below 1 favors buyers. In short, we have moved from a strong seller’s market since the beginning of last summer towards a more normal and balanced market, and in many cases, now favoring buyers.

 

  • The percentage of homes “sitting” has come down to 40% of the homes listed now remaining active for 30 days or longer, while 20% have stayed on the market for 60 days or longer. This improvement is usually due to the number of New homes that were listed in January and February. Still there are more homes “sitting” this year as compared to last year, (with then 27% remaining active over 30 days and 12% remaining active over 60 days).

 

  • It’s hard to predict how much tax reform will play into this but see the article, “Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee.” We are seeing interest rates starting to go up. Prices have continued to rise and are only now beginning to flatten out. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.

 

  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

  • The month’s supply for the combined 39 city area is 36 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 21 days.

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,373 homes actively for sale. This is higher than last year at this time, of 1,524 or (55.7% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased to 2,006, less than what we saw last year at this time of 2,201, or 9.1% lower.

  • Our Pending/Active Ratio is .85. Last year at this time it was 1.44.

 

  • Sales over the last 3 months, on average, are 1% over the asking price for this area, lower to what we saw last year at this time, 3.8%.

Recent News

Power is Shifting To Buyers in Most California Housing Markets in 2019

By Michael Gerrity, World Property Journal, March 8, 2019

 

High prices still make it difficult to afford a home in many US markets

Zillow is reporting this week that a limited U.S. housing inventory and rapid price appreciation have kept sellers firmly in the driver’s seat for several years as the United States recovered from the housing market collapse in 2008. Now, buyers are gaining more negotiating power as the housing market slows, especially in some of the nation’s hottest markets.

According to Zillow’s Buyer-Seller Index, in 20 of the 35 largest U.S. metros, market conditions favor buyers more than they did a year ago. The index is based on the share of listings with a price cut, how long it takes to sell a home, and the sale-to-list price ratio. By comparing each metro across time, this analysis shows whether the market is cooler (favoring buyers) or hotter (favoring sellers) than it was in the past.

California markets have seen the biggest shift toward buyers since last January, led by San Jose, which has seen the most significant swing. San Francisco, San Diego, Los Angeles and Denver round out the top five markets where buyers will have an easier time navigating the market than they would have in recent years.

Even though San Jose and San Francisco have cooled exceptionally, they are still the hottest markets compared with others around the country, markets where listings see few price cuts, homes don’t stay on the market for long, and sale-to-list price ratios are higher. In these two Bay Area markets, home prices are so prohibitive, the typical buyer must put more than a 20 percent down to keep mortgage payments at or below 30% of monthly household income.

San Jose buyers would need a 49 percent down payment, or $614,100, nearly three times as much as the national median home value. Buyers in San Francisco (43 percent), Los Angeles (43 percent) and San Diego (31 percent) would also need to put down more than 20 percent.

“It is no surprise that the markets which pushed the bounds of affordability over the housing recovery are now experiencing significant cooling,” said Skylar Olsen, Zillow Director of Economic Research. “As down payments and mortgage payments far outpaced incomes, buyer demand eventually exhausted itself. Those buyers looking in cooling markets will likely welcome the relief, although the entry price is still high. Inventory is returning and spending more time on market, meaning their decision making can be made with a cooler head.”

While some of the hottest markets slowed down over the past year, others have become more seller-friendly.

Miami – which tends to see large fluctuations – has seen the biggest overall shift toward favoring sellers over the past year, with homes selling about a week faster than they did a year ago.

Even cool, Bay Area housing market is still hot

The typical buyer in Santa Clara County needs $614,000 down to keep mortgage within budget

By LOUIS HANSEN, Bay Area News Group, March 20, 2019 

he San Jose housing market has cooled more than any other in the country — and it’s still the hottest in the nation, according to a recent Zillow survey.

The bidding wars and quick cash sales have abated, and home sellers are cutting prices more often and waiting longer to close deals than a year ago. But middle-income families still struggle to afford the median priced home of $1.2 million in the San Jose metro area. A typical family needs to put about $600,000 down to fit that mortgage comfortably in their budget.

“Buyers are not being forced into crazy bidding wars to leapfrog each other into a house,” said Zillow economist Jeff Tucker. But, he added, “It has been the hottest market in the country. In a lot of ways, it still is.”

The Bay Area housing market has rocketed up and pushed out many would-be buyers. Median sale prices for existing homes have climbed, year-over-year, every month since April 2012, according to real estate data firm CoreLogic. These rising prices — the median sale price in January for the nine-county region was $750,000 — have slowed Bay Area home buying to its lowest level in a decade.

Sales slumped nearly 13 percent in January from the previous year. Agents say homes priced over $2 million are spending longer on the market, and CoreLogic data found transactions for luxury homes in San Mateo and Santa Clara counties dropped by more than 25 percent in December and January.

Real estate agent Ramesh Rao said higher-end properties in Cupertino and Saratoga are taking longer to sell. “At the moment, it is neither clearly a sellers’ market nor a buyers’ market,” Rao said in an email. “The market is moving sideways.”

Zillow measured the slowdown by charting home listings with a price cut, the length of time it takes to sell, and the sale-to-list price ratio. Last year, homes in San Jose metro took 41 days from listing to close, a remarkably quick turnaround given the typical steps a home sale requires — bank approval, inspections and insurance. It took 49 days in the San Francisco and Oakland metro area.

“That’s just lightning fast,” Tucker said. Some of the quick deals could be attributed to all-cash offers with buyers agreeing to take properties as-is, with no contingencies, he said.

San Jose homes now take about 60 days from listing to closing, while homes in the East Bay and San Francisco take 57 days to finalize a sale, according to Zillow.

About 15 percent of homes listed in the San Jose metro area took a price cut. Homes still sold for a robust 97 percent of asking price.  Last year, the typical property sold for a 7 percent premium over asking price.

In the East Bay and San Francisco, 11.5 percent of sellers dropped prices and sold their homes for an average of 98.6 percent of the asking price.

But even as the market cools, median home values have surpassed $1 million in the San Jose metro area and ticked up to $957,000 in the San Francisco metro. At those prices, a family in Santa Clara County making the county’s median income of about $107,000 would need to put $614,000 down to keep mortgage payments at 30 percent of their monthly earnings.

Agents say demand remains robust, despite the few hints of a slowdown.

Agent Mark Wong of Alain Pinel said demand is strong for entry-level homes, listing for about $1 million, on the Peninsula. Wong sold two homes recently in Mountain View and San Jose for more than the asking price and with no contingencies. Both sellers accepted offers within two weeks, he said.

On a recent weekend, Wong had 50 people tour an open house during a rainstorm. “Lots of people still want to get into the market,” he said. “I don’t think it’s slowing down.”

Will Doerlich with Realty One in San Ramon said homes for sale have increased in East Bay cities, and sellers have been willing to accept more contingencies on offers.

But in San Ramon, Dublin and Pleasanton, he said, “it’s extremely busy and extremely competitive, still.”

Here’s why San Francisco housing prices could soon get even crazier

San Francisco has the highest housing prices in the nation, and it may only get worse.

By MIKEMURPHY, Market Watch, Mar 7, 2019

 

San Francisco is already facing a housing and affordability crisis, but it may be about to become a lot worse.

By the end of 2019, the city could have hundreds, even thousands, more millionaires — on paper at least — thanks to a slate of tech IPOs lined up. On Thursday, a report by the New York Times’ Nellie Bowles laid out what may be coming, boiled down to two words: “Housing madness.”

San Francisco-based tech unicorns planning to go public in the near future include Uber Technologies, Lyft, Slack, Postmates, Pinterest and Airbnb. While the San Francisco Bay Area has been no stranger to tech IPO riches in recent years, as Bowles pointed out, previous big tech IPOs — think Google and Facebook — have been largely based outside San Francisco and had workers spread out around the area. This new crop are based in the city itself, and many of their employees live there as well — or want to.

Real estate agents are already drooling. According to the Times, at a recent gathering, one agent said there likely won’t be any one-bedroom condos in San Francisco under $1 million within five years. And single-family homes, which already average well over $1 million, will reach an average of around $5 million, he forecast.

Millennial tech workers want the convenience of the city, another real-estate agent told the Times: “They seem to not want to own cars, and food deliveries are really easy now, and they want to be close to entertainment, so they’ll stay in the city.”

That could be bad news for non-millionaires who are trying to find an affordable apartment or — gasp! — even a house. Displacement is likely to increase as housing prices become even more out of reach for lower- and middle-class people. The median price of a one-bedroom apartment in San Francisco recently hit a new high of $3,690 a month, according to real-estate website Zumper, up 9% from the same time last year. That’s more than $800 higher than the median New York City apartment.

But while San Francisco’s inequality gap may grow, some small businesses are poised to cash in. Event planners told the Times that the upcoming IPO boom will likely surpass the ‘90s tech bubble in terms of sheer excess — which is good news for them. One told the Times that party budgets for tech companies can top $10 million, with A-list entertainment. One recent tech exec’s ‘80s-themed party featured the B-52s, Devo, The Bangles, Tears for Fears and A Flock of Seagulls, the planner said.

At least one electric bike shop is stocking up its inventory, predicting a sales boom later in the year, and a nearby ice sculptor is gearing up for a big year, likely carving everything from massive ice sculptures to ice cubes with company logos engraved in them.

The size of the coming boom is no sure thing — IPO bubbles have a nasty tendency to pop, as employees of companies such as Snap SNAP, -0.11%   and Blue Apron APRN, -3.85%   can attest to. Employees’ stock options will be locked up for months after the companies go public, and it’s unlikely most will entirely cash out at once. Still, there will likely be a noticeable effect.

The growing financial excess has some talking about the certain backlash.

“There’s some who’ve talked about pitchforks,” a private wealth adviser told the Times. “And I don’t think we’ll go there, but there’s a point when that makes sense.”

Bay Area home prices ‘totally random’ as sales slow

By Kathleen Pender, San Francisco Chronicle, March 1, 2019 

The median Bay Area home price rose at its slowest year-over-year pace in two years in January as a slowdown that hit the real estate market in September continued into the new year.

The median price paid for a new or existing home or condo in deals that closed in January in the nine counties was $730,000, down 7 percent from December and up 2.2 percent from January of last year, according to a report released Thursday by research firm CoreLogic. In January 2018, the median price rose 13.8 percent from a year earlier.

Prices rose in the double digits for 13 consecutive months until September, when the market downshifted amid a big jump in inventory. Buyers backed off during the past three months of the year amid a jump in interest rates, a sharp stock market correction and general lack of affordability.

Many sales that closed in January were struck in December.

By the end of February, the stock market had recovered most of its losses and mortgage rates were the lowest in more than a year. The average rate on a 30-year mortgage this week is 4.35 percent, down from nearly 5 percent in November and 4.43 percent a year ago, according to Freddie Mac.

The market now “is totally random,” said agent Alexander Clark of TheFrontSteps Real Estate in San Francisco.

He listed two homes on Page Street last spring “that literally flew off the shelves,” he said. He listed another on Page Street just after Labor Day that didn’t sell until January, after he had taken it off the market. The buyer had seen it in September. Another house he sold on Page Street that closed in late January took just as long.

Bay Area home sales slow but prices shift back into high gear

Sales drop nearly 20 percent in Santa Clara, Contra Costa counties

By LOUIS HANSEN,  Bay Area News Group, March 1, 2019

For a few months, it seemed as if the speeding Bay Area housing market was ready to slow down.

Agents reported sluggish sales and buyers having a few more options.

But any buyer relief was short-lived — median sale prices for existing Bay Area homes surged 4.9 percent year over year in January, according to a report released Thursday from real estate data firm CoreLogic. The region’s highest-in-the-nation home prices sent many shoppers to the sidelines, and overall sales dropped 12.8 percent, hitting lows not seen in more than a decade.

CoreLogic analyst Andrew LePage said buyers delayed purchases due to stock market volatility and uncertainty caused by the government shutdown. The Bay Area had its lowest number of January home sales in 11 years, according to CoreLogic.

“Sales started to sputter late last year,” LePage said. “There’s plenty of people just priced out.”

Future changes in the market, he added, will hinge on mortgage rates, housing inventory and the strength of the economy.

In December, median sale prices inched up just 1.3 percent, hinting at a possible end to a record-breaking streak of higher prices that started in April 2012. Four counties actually saw price drops.

But families and individuals buying homes in January found the simmering market still bubbling throughout the nine-county area, with median prices for existing homes rising to $750,000 in January, a gain of $35,000 from the same time last year.

Median sale prices rose 1.9 percent to $1.07 million in Santa Clara, 5.6 percent to $565,000 in Contra Costa, 1 percent to $767,750 in Alameda, and 3.9 percent to $1.3 million in San Francisco. Prices dropped slightly in San Mateo County, where the typical home sold for $1.33 million.

The median sale price for existing homes peaked in May at $935,000.

But the high prices in Santa Clara County — home to tech giants and a booming economy — contributed to home sales falling 18 percent from the previous year. Bargain hunters even stayed away from more affordable Contra Costa County, where transactions dropped 17 percent.

Agents say the market for starter homes — in the Bay Area, around $1 million — remains hot. Buyers are more discerning for properties selling around $2 million.

The sales slowdown was more pronounced for high-end homes on the Peninsula, according to CoreLogic. The number of homes that sold for more than $2 million dropped, year-over-year, in December and January by 36 percent in San Mateo County and 26 percent in Santa Clara County.

But overall, agents report strong demand and short housing supply as the local economy surges.

“Is now a good time?” said Alameda agent Sophia Niu. “In the Bay Area, now is always a good time.”

The market looked to be slowing down in the last quarter of 2018, Niu said. But the first two months of 2019 have been busy for Niu and other East Bay agents, she said.

Nui placed a four bedroom, 1,800-square-foot single family home in Alameda on the market in January. Her clients expected a softer market than the year before. But after two open houses, the owners received multiple offers substantially above the $828,000 asking price, Niu said.

“All indications are that this year is going to be really strong,” she said.

Nancie Allen, president of Bay East Association of Realtors, said the pace of sales has slowed. “Buyers are feeling much more patient,” she said. If a home looks like a good deal, she added, “I’m still seeing multiple offers and offers way above asking.”

Real estate agent Ramesh Rao, of Cupertino, said high-end sales have been slower, and customers have been more savvy about checking prices.

Michael Tkachuk, 42, moved from Luxembourg in September with his wife and 11-year-old son. He braced for high prices in the Bay Area but was willing to make the move for an enticing tech job and good schools.

“We knew that it was expensive,” said Tkachuk, an executive at a cybersecurity firm in Santa Clara. But by the end of July, he added, “the market kind of cooled down.”

They spotted an ideal house with five bedrooms and a big backyard on a quiet street in Los Gatos and bought below the $2.8 million asking price. The school is great and the neighborhood is filled with redwoods.

Rao, Tkachuk’s agent, said his tech industry clients come into the market with more data and sophistication.

New agency would raise public dollars to build thousands of housing units in the Bay Area

By Rachel Swan, San Francisco Chronicle, March 7, 2019

A new Bay Area agency would raise public funds to build thousands of homes a year, provide emergency rental assistance for tenants and help cities acquire land parcels for affordable housing, under a bill that state Assemblyman David Chiu will introduce Thursday.

The regional agency would be a housing version of the Metropolitan Transportation Commission, which oversees roads and transit in the nine-county Bay Area, and it would be empowered to place funding measures on the ballot. But already, the blueprint for Chiu’s bill has drawn opposition in suburbs that have long fought off affordable housing and fear they could lose local control.

Chiu is resolute. “I deeply respect the process and importance of localities being able to shape their communities,” he said. “But this cannot mean doing nothing … when so many residents are considering leaving our region because of housing costs, when workers are driving two or three hours a day to get to their jobs, when eviction rates are what they are.”

His legislation calls for the creation of the Housing Alliance for the Bay Area, spawned from a controversial 10-point document that Bay Area leaders approved in January. Dubbed CASA, the compact brought together developers, tech executives, politicians and tenant advocates who agreed to a set of principles: produce 35,000 homes a year throughout the nine-county region, protect longtime residents in neighborhoods that are rapidly gentrifying and tackle a housing shortage that has gnawed at the Bay Area for years.

The bill would use those guidelines as inspiration for a binding law and would generate $1.5 billion a year to get it started.

“This is the most intense challenge our region faces,” said Chiu, D-San Francisco. He added that the nine counties are “deeply interconnected” — failure to add development in Berkeley, Brisbane and Cupertino puts more pressure on Oakland and San Francisco.

CASA — a catchier nickname for Committee to House the Bay Area — had its genesis two years ago, when the Metropolitan Transportation Commission and the Association of Bay Area Governments convened a panel of mayors, developers and tech companies to address the problem together, drafting policies that would shield residents from displacement while putting more homes near transit lines and job centers. These ideas are catching on throughout the state: Gov. Gavin Newsom elevated housing to the top of his policy agenda, and lawmakers have introduced more than 200 bills this session to tackle the issue.

Yet the push to accelerate production has also hit resistance, particularly from smaller cities that call the CASA 10-point compact a cynical attempt to undermine their authority to make decisions. On Wednesday, just hours before Chiu planned to roll out AB1487, the city councils of Lafayette, Moraga and Orinda held a joint meeting at the Lafayette Library to air their concerns. Council members of the three cities were unaware of Chiu’s bill when they scheduled the meeting.

“They’ve totally usurped the public process here, and as a result they’ve influenced legislation,” said Lafayette Mayor Cameron Burks, referring to what he and others view as an underhanded attempt by the CASA panel to create a script for legislators. He noted that many of the 200 state bills have “CASA elements”: Some would override local zoning ordinances and limits cities’ ability to obstruct new development.

Chiu stressed that the Housing Alliance wouldn’t strip land-use authority from cities or counties, and it wouldn’t have the power of eminent domain to seize private property. Yet he’s still bracing for conflict. Critics of CASA reject the notion of a regional housing strategy, calling it “cookie-cutter” and “one-size-fits-all.” Proponents say the Bay Area has to unify if its leaders want to solve the complex housing crisis, which has pushed people into wildfire zones and forced them to endure long commutes.

The same debate flared up last year when Chiu successfully pressed legislation that enabled BART, the region’s rail system, to zone its parking lots for housing. That bill, AB2923, was supposed to sail through with little opposition. Instead, it drew support in the housing-hungry urban core but angered mayors and city council members in the suburbs who didn’t want to cede land-use decisions to a transit agency.

Even within the Metropolitan Transportation Commission, officials have mixed feelings about the CASA housing plan.

“There are things I love about it, but some of the dollar amounts are ambitious,” said Commissioner David Rabbitt, who is also a Sonoma County supervisor. He represents an area where officials are spending their political capital on sales tax measures to raise money for disaster relief. Housing is a huge need, he said, but there’s no money for it.

Commissioner Gina Papan, a city councilwoman in Millbrae, has also panned CASA for trying to “cookie-cut” a diverse Bay Area.

“Seventy percent of Bay Area residents live outside the big three cities that seem to be pushing this,” she said, referring San Francisco, Oakland and San Jose. Papan was appointed to the commission this year to represent San Mateo County, replacing Redwood City Councilwoman Alicia Aguirre, who lost her seat after voting for CASA.

Quest to leave Bay Area’s high prices and traffic grows

Bay Area most popular place to leave, Redfin study says

By LOUIS HANSEN, Bay Area News Group, February 15, 2019

High home prices, expanding rush hours and maybe the futile search for a cheap cup of coffee and affordable avocado toast adds up to one thing — the Bay Area is getting more popular to leave.

A new study by Redfin shows about 24 percent of online searchers in the Bay Area are looking elsewhere for a home — up from 19 percent last year.

“We’ve seen a lot of people leaving San Francisco and that trend has only increased,” said Daryl Fairweather, chief economist at Redfin. She added that data from searches on the company’s website has been able to predict migration trends that later appear in census data.

The study looks at home searches done on Redfin in the last three months of 2018. Bay Area residents were the top searchers for homes in Sacramento, Portland, Seattle, and Austin, Texas. The region outstripped New York, Los Angeles and Washington, D.C. for highest concentration of Redfin users actively looking to leave their city.

The strong Seattle economy, relatively lower housing prices, and the ease of transferring to other tech companies make that city a favorite choice, Fairweather said. “It’s really about jobs,” she said. “If you’re already in the industry, it’s a really easy transition.”

The study highlights a trend of outward migration from the Bay Area, although until recently newcomers outnumbered those leaving. The nine county region’s tops-in-the-nation home prices — the median sale price for an existing home in December was $775,000 — have sent discouraged residents young and old to out-of-state Realtors and moving companies.

An annual study released Wednesday by Joint Venture Silicon Valley confirms the steady migration away from the region. Silicon Valley gained roughly 20,500 foreign immigrants last year, while 22,300 residents moved to other regions and states.

Between July 2015 and July 2018, about 64,300 Silicon Valley residents left the region, replaced by 62,000 immigrants from other countries, according to the Joint Venture index.

Relocation has become a growing part of many local real estate agent’s portfolios.

Sacramento agent Devone Tarabetz has collected clients from San Jose, San Francisco, Oakland, Milpitas and Petaluma in the last year. “Affordability is usually the number one thing,” said Tarabetz, a San Jose native who has lived in Sacramento for two decades.

The mix of Bay Area clients going north include young families moving from San Francisco for a bigger home in a safer neighborhood to investors looking for deals on duplexes and small apartment buildings, she said. In the last year, she said, “I’ve seen a huge jump.”

She cautions newcomers about the weather (it’s hotter) and the schools (spotty) but encourages them to trade high rents and small apartments for single family homes in growing and safe communities. When they see their first homes, she said, “it’s a shock.”

Los Gatos agent Brian Schwatka has seen his business grow by focusing on older residents looking to leave Silicon Valley. The Sacramento region has been a favorite destination for several of his clients, he said, as well as Santa Rosa.

“People are looking for some sort of equivalent to the Bay Area,” he said. “It’s a mass exodus.”

Older Bay Area movers are generally looking for a less expensive area with the nice weather they’re used to — ruling out desert climates like Las Vegas and Phoenix, but opening up cooler spots like Portland and even Boise, Idaho, Schwatka said.

Idaho’s largest city has a population of 225,000, averages 30 inches of snow annually, and has summer temperatures that peak at 90 degrees. It’s a two-hour flight to the Bay Area, Schwatka said, making it an easy trip back to friends and family.

House hunters can find deals where the median home value is $287,000, according to Zillow. Prices have climbed 17 percent in the past year.

Many of his clients, he said, share a common refrain: “It just doesn’t feel like the old Silicon Valley anymore.”

Recession Watch: Will Another Downturn Rock the Housing Market?

By Clare Trapasso, Realtor.com, Feb 21, 2019

The Great Recession has receded in the rearview mirror, and pretty much every American would like to keep it that way, thank you very much. But we’re still all too aware that the whole financial disaster was precipitated by a deluge of bad mortgages. Sure, we’ve had nearly a decade of booming home sales and prices. But now that they’re slowing their roll, the whispers are starting to mount: Is another recession around the corner?

About 39% of Americans think the economy is slowing down, while 17% think we’re already in a recession or depression, according to a recent Gallup poll.

Yes, we might see a recession soon, economists say—but there’s no need to panic. That’s because the financial factors that helped cause last decade’s crash don’t exist this time around.

“We’re just scared because of what happened last time. And that’s not what’s going to happen [again],” says Lisa Sturtevant, a housing consultant and chief economist at Virginia Realtors, the state’s real estate association.

If there is another recession, she says, “most people are not going to lose their house. Most people are not going to lose their jobs.”

That’s a relief to hear—but then again, few experts predicted the lasthousing bust.

If a downturn does hit, probably toward the end of this year or the beginning of next year, most economists believe it will be brief and not nearly as painful as the last one. They anticipate that unemployment, currently at an extremely low 4%, will tick up slightly and there will be fewer new jobs created. But they don’t envision widespread layoffs resulting in scores of foreclosures and plunging home prices, as we saw in 2008–09.

“We’re at a record-low level of unemployment. The economy can’t stay here,” says Chief Economist Danielle Hale of realtor.com®. She forecasts a recession beginning within the next two years. “This one will be mild.”

Why it looks like we’re due for a recession

Although a recession can be precipitated by a housing bust, trade war, or global event, this time the U.S. economy may simply become a victim of its own success.

With national unemployment so low, employers have to compete hard for talent by offering higher wages. Those increased costs are often passed onto consumers. This in turn causes inflation as goods and services become more expensive. If inflation rises much higher than wages, then the country has a problem.

Enter the U.S. Federal Reserve. It battles inflation by notching up interest rates. The downside is that makes it more expensive for businesses to borrow money to expand or bring on more workers. And that can effectively slow down the economy.

It’s like someone blowing too much air into a balloon—eventually a little needs to be let out or it’ll pop. Similarly, the Fed needs to siphon off a little of the economy’s helium. It hiked rates four times last year, when the economy was hurtling along, but this year it may do it only once, if at all.

Actually, economic cycles in which the economy is growing and more jobs are being created historically don’t last more than a few years. The longest stretched from 1991 to 2001. This summer will mark the longest economic expansion in U.S. history from the trough of the crisis in June 2009.

So the good times eventually must come to an end.

This slowdown, coming on the heels of a wild run-up in home prices, may feel like déjà vu. But the main culprit behind the previous housing market bust was the torrent of subprime mortgages doled out to underqualified and often uninformed buyers. When those owners defaulted, it created a domino effect, ultimately affecting all corners of the nation’s economy.

After that, lending laws were considerably tightened across the board. Borrowers today must be in much better financial shape in order to snag a mortgage.

“Underwriting is a lot tighter, and the [loans] are a lot less risky,” says Joel Kan, who oversees economic and industry forecasting at the Mortgage Bankers Association. “Households are in a better position to absorb the shock than they were back then.”

Will a recession lower home prices?

Buyers on a budget shouldn’t pin their hopes on a recession to create a vast clearance sale of deeply discounted properties. Prices aren’t expected to plummet, although they may dip in more expensive markets. Overall, price appreciation will likely just continue to slow.

But if the Fed lowers interest rates again to counteract a poor economy, mortgage rates will likely go down, too. That will also make it cheaper to buy a house.

“If there is a recession, the people with stable jobs will see it [as] a second-chance opportunity to buy a home,” says Lawrence Yun, chief economist of the National Association of Realtors®. Yun doesn’t anticipate a recession this year, or next. “Prices may [or may not] come down. But certainly buyers will be in a better negotiating position.”

And even in a shakier economy, overall demand for housing, which keeps prices up, isn’t going to evaporate. The huge millennial population is getting older, settling down, and having children—and searching for homes of their own. Those life factors are not likely to change, and they create a massive demand for housing. A decade ago, it was mostly Gen Xers at that stage, a smaller generation with less impact.

The places that are most likely to see prices sink are more expensive markets that have experienced years of steep price hikes. For example, Silicon Valley’s San Jose, CA, could see corrections, says Hale.

Markets with more housing than buyers, such as Miami, where new developments have been going up at a breakneck pace, may also soften, says Norm Miller, a real estate finance professor at University of San Diego.

The luxury market, which is the priciest 5% of homes in any area, will also probably be affected.

“There are just more expensive homes [than affordable ones] for sale, and so the luxury market is likely to be more vulnerable to price corrections in the event of a recession,” says Hale.

A recession could worsen the housing shortage

One of the signatures of the past recession was the overabundance of newly built homes. When the economy collapsed and the buyers disappeared, builders across the nation were forced out of business basically overnight. Abandoned construction sites were littered across the country. The industry still hasn’t caught up with the renewed demand, and another recession could worsen the situation.

Only about 875,00 single-family homes were built last year, according to the National Association of Home Builders. But the nation needed about 1.1 million to ameliorate the shortage. If another downturn hits, builders will likely construct even fewer homes, says Rob Dietz, chief economist of the NAHB.

That means when the country recovers, we could experience even greater housing shortages than we’ve seen over the past few years.

The pace of single-family home construction growth is already slowing down, from 9% in 2017 to about 3% in 2018. Dietz predicts it will be less than 2% in 2019.

Building is expected to remain strong in places with strong population growth, such as the Southeast, Texas, and the mountain states of Montana, Idaho, Colorado, and Utah. Folks need places to live, after all.

But the current higher mortgage rates make it harder for folks to buy homes. Meanwhile, inflation results in higher land, materials, and construction labor costs. That typically translates into fewer new homes going up.

“For builders, it means that demands will fall back in some markets and they will pull back,” says Dietz.

Renters won’t be spared by a recession

Cash-strapped tenants hoping for a rent break likely won’t get lucky even if the economy does start to slump. Rent price growth is likely to slow or even stall as fewer folks are going to be dropping big bucks on housing, says Greg Willett, chief economist at RealPage, a property management technology and analytics company focused primarily on rentals. But it’s not likely to fall.

The exception is the luxury market, where landlords will have the most trouble finding tenants.

“Luxury will feel the pain first,” says Willett.

There could be some longer-term consequences as well as fewer rental developments are typically built when the economy sputters, so when things are a bit rosier, there may be fewer units available to fill demand.

Depending on how long the recession lasts, some condo buildings that can’t find buyers may eventually go rental. That’s most likely in places with an oversupply of housing, such as Miami, Miller says.

“[The last] financial crisis was unique with an unprecedented number of foreclosures, home price declines, and a stunning drop in homebuilding,” says Dietz. “The question is whether we’re going to experience a soft landing, a bumpy landing, or a crash landing.”

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net


Posted on March 20, 2019 at 3:47 pm
Glen Bell | Posted in Uncategorized |

Glen’s January 31st, 2019 San Francisco East Bay Real Estate Market Update

January 31, 2019 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here are some highlights for the 38 East Bay Cities that I track:

Affordability, rising interest rates, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

  • Here’s where we stand as of the end of January. Typically, we see a dramatic drop in inventory during December followed by a modest increase in January. Inventory did increase by 18.8%, now sitting at a 30 day supply of homes for sale, (However, much higher in comparison to last year’s January of an 18 day supply). Pendings came down slightly, and are now 6.3% lower compared to last year. The pending/active ratio came down as well to .78, still below our neutral mark. However, our ratio last year at the end of January was 1.38. This is the seventh month in a row that the ratio falls under 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers as has been the case now for quite some time. A number below 1 favors buyers. In short, we have moved from a strong seller’s market since the beginning of summer towards a more normal and balanced market, and in many cases, now favoring buyers.

 

  • The percentage of homes “sitting” has come down to 41% of the homes listed now remaining active for 30 days or longer, while 29% have stayed on the market for 60 days or longer. This improvement is usually due to the number of New homes that were listed in January.

 

  • It’s hard to predict how much tax reform will play into this but see the article, “Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee.” We are seeing interest rates starting to go up. Prices have continued to rise and are only now beginning to flatten out. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.

 

  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

 

 

  • The month’s supply for the combined 39 city area is 30 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 18 days.

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,098 homes actively for sale. This is higher than last year, at this time, of 1,294 or (62% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 1,629, less than what we saw last year at this time of 1,781, or 6.3% lower.

 

  • Our Pending/Active Ratio is .78. Last year at this time it was 1.38.

 

  • Sales over the last 3 months, on average, are 1.2% over the asking price for this area, lower to what we saw last year at this time, 3.6%.

 

 

Recent News

As Cooling Kicks In, More List Prices Slashed

By Suzanne De Vita, RISMEDIA, January 31, 2019

Conditions for home sellers are shifting.

According to new realtor.com® research, although gains in home prices are still strong, more listings have had their prices reduced—an indication that multiple-offer scenarios are shrinking, and homebuyers have more options.

Across the country this month, 15 percent of listings had prices reduced, the research shows. Last January, the figure was 13 percent.

Where are cuts happening the most? Thirty-nine, or 78 percent, of the 50 largest markets in the nation had more listings with lowered prices, with Las Vegas leading the way, at 16 percent.

Days on market, or how long a property sits, is speeding up, as well. In January, the average home was on the market for 87 days—two days faster than in Jan. 2018. However, the rate’s slowing; back then, days on market was seven days faster than the prior year.

Comparing the 50 largest markets to the past year, the average listing took one more day to sell, the research shows. Homes in San Jose sat for 27 more days than they did in the past year, the highest increase of the largest markets. In Birmingham, the average home sold 14 days sooner, the biggest leap of the metros.

There was expanded inventory in January, but concentrated in the higher tiers, where demand is not as strong, according to realtor.com’s research. Housing inventory in the $750,000-plus range rose 12 percent year-over-year, while $200,000-level listings sunk 6 percent. Inventory rose significantly in:

  • San Jose-Sunnyvale-Santa Clara, Calif. – 128% YoY
  • Seattle-Tacoma-Bellevue, Wash. – 91% YoY
  • San Francisco-Oakland-Hayward, Calif. – 58% YoY
  • San Diego-Carlsbad, Calif. – 46% YoY
  • Los Angeles-Long Beach-Anaheim, Calif. – 36% YoY
  • Nashville-Davidson-Murfreesboro-Franklin, Tenn. – 36% YoY
  • Portland-Vancouver-Hillsboro, Ore.-Wash. – 34% YoY
  • Sacramento-Roseville-Arden-Arcade, Calif. – 28% YoY
  • Boston-Cambridge-Newton, Mass.-N.H. – 27% YoY
  • Dallas-Fort Worth-Arlington, Texas – 25% YoY

“The U.S. housing market is off to a slower start this year in many markets, compared to the rapid acceleration we saw last January,” says Danielle Hale, chief economist at realtor.com. “Although the market is slowing, it’s important to remember that we’re coming off of four straight years of inventory declines that pushed the market to a record low availability of homes for sale.

“The real metric to keep an eye on is entry-level homes, which are the key to getting today’s market back in balance,” Hale says. “These homes are still in short supply.” 

Bay Area home sales drop 21 percent in December

“Would-be buyers remain priced out”

By Adam Brinklow  February 1, 2019, 12:59pm PST

Orange County-based data firm Core Logic made yet another startling announcement about the state of the Bay Area’s real estate market Friday, reporting that December 2018 home sales figures dropped more than 21 percent year over year in the region and down nearly 19 percent in San Francisco.

While the results are not necessarily a surprise—Core Logic’s monthly Bay Area home sales’ reports have indicated a decline in home sales year over year for most of 2018—December represented the single biggest drop yet.

Here are some of the highlights:

  • December’s dip was particularly dramatic. Across all nine counties, Core Logic records 5,431 sales in December, down from 6,154 the same time the previous year. That’s a 21.6 percent decline, the largest all year.
  • The month-to-month sales gap was notably large too. Between November and December of last year, sales dropped 13.2 percent across all nine counties. It’s normal for fewer homes to sell in December, but “since 1988, the average change in San Francisco Bay Area home sales between November and December is a gain of 7.8 percent.”
  • Most of 2018 saw year-over-year declines in sales. This was the seventh straight month that Core Logic reported a drop between 2017 and 2018 sales. During that period the decline in July was just 0.5 percent, a very narrow gap compared to other months, which saw drops of anywhere from 8.6 to 21.6—but still a drop nevertheless.
  • Prices remain up compared to last year. The latest report estimates that “the median price paid for all homes sold in the San Francisco Bay Area in December 2018 was $785,000.” That’s up from $750,500 the previous year. Note that this figure includes both condos and houses.
  • San Francisco’s dip was one of the smallest regionally, but still gasp-inducing. Compared to the same period in 2017, San Francisco sales were down 18.8 percent, from 447 homes sold to 363. That’s almost modest compared to, say, the 27.7 percent decline in San Mateo County, or 27.3 percent in Solano County. But only three counties had a smaller decline than SF, and two of those—Alameda and Napa—barely beat out SF with 18.6 percent drops. Regionally, Sonoma took the smallest year-over-year hit, down 7.4 percent. There were no gains.

Core Logic analyst Andrew LePage said in a press release that “the nearly 22 percent year-over-year drop in activity was the largest for any month in more than eight years.”

LePage suggested a variety of potential explanations, including a seven-year high in mortgage rates and a bum stock market making some potential buyers anxious.

Most significant of all is the suggestion that “some would-be buyers remain priced out or unwilling to buy amid concerns prices have overshot a sustainable level.” Imagine that.

As with past month’s reports, the California Association of Realtor’s (CAR) most recent report mostly corroborates Core Logic’s analysis.

Though CAR reports “only” a 17.5 percent drop across the region, both sources agree that for the most part sales were down consistently year over year for most of 2018.

The big discrepancy between the two reports is in San Francisco, where CAR reports that sales actually increased 11.3 percent in December, the only county to record any net gain.

The disagreement stems from the fact that CAR records only single-family-home sales, while Core Logic also factors in condos—meaning that December’s dip in condo sales proved great enough to overwhelm an apparent (and singular) surge in the sale of larger homes.

Poll: Nearly half of California voters say they can’t afford living in the state

By Joel Shannon, USA TODAy,  Feb. 7, 2019

A new poll has found nearly half of California voters believe they can’t afford to live in the state.

The Quinnipiac University poll released Wednesday reports that 43 percent of California voters said they can’t afford to live there. That number was driven by younger voters: 61 percent of voters age 18 to 34 said they can’t afford to live in California.

“For many Californians, life is less than golden in the Golden State,” the release quotes Tim Malloy, assistant director of the poll.

Surging housing prices in California led CALmatters to report that the state was the poorest in the country in 2017. The organization reported then that 20 percent of the state’s population struggled to make ends meet.

In a September 2018 analysis, 24/7 Wall Street listed 12 California cities in a list of the 25 most expensive cities in America.

The most expensive – the San Jose-Sunnyvale-Santa Clara metro area – has a cost of living 27.1 percent higher than the national average, the analysis found. The monthly cost of living for a family of four is $10,758, the analysis found.

A rise in high-paying tech jobs has contributed to a tight housing market and a growing homelessness problem along the West Coast. That has multiple California cities to pass high-profile legislative actions to combat the issue.

San Francisco voters passed a proposition in November to levy a tax on the city’s wealthiest companies and use the money to increase funding for homelessness services. San Francisco ranks among the least affordable cities in the nation, with a median single-family home value approaching $1 million.

This week, the San Diego City Council said the city will stop punishing people for living in their vehicles. It’s a move toward more constructive policies on homelessness, advocates said.

“It’s certainly not a permanent solution to the crisis that we are facing,” City Councilman Mark Kersey told the San Diego Union-Tribune. “But 100 percent of the time, I’d rather have someone sleeping in a car than on the sidewalk.”

Bay Area housing market cools, but it’s still nuts

By Kathleen Pender, SF Chronicle, January 31, 2019

The Bay Area real estate market went into 2018 with a bang and out with a whimper.

In the first half of the year, the median price rose almost 17 percent to an all-time high of $875,000 in June. In the second half, it fell 10.3 percent from that peak, ending at $785,000 in December.

The December price was down 3.7 percent from November but up 4.6 percent from December 2017, according to a report Thursday from research firm CoreLogic. It includes all new and existing homes and condos in the nine Bay Area counties.

An earlier report from the California Association of Realtors — which includes only existing, single-family homes entered into a multiple listing service — said the Bay Area median price fell to $850,000 in December, down 6.1 percent from November and down 3.6 percent from December 2017. That was the first year-over-year drop since March 2012.

Any way you look at it, the market downshifted in the last three months of 2018. As the stock market plunged and mortgage rates rose a half percent to almost 5 percent, buyers backed off, inventory grew, price cuts surged, and price appreciation slowed from the double to single digits on a year-over-year basis.

The number of homes sold in December fell to 5,341 across all nine counties, down 13.2 percent from November and 21.6 percent from December 2017. That was the lowest sales count for a December in 11 years, CoreLogic said.

Many sellers, perhaps unaccustomed to a less-than-ridiculous market, took their homes off the market or let their listings expire. A total of 2,493 listings in the nine Bay Area counties were withdrawn or expired in December, compared with only 1,154 in December 2017 and 1,487 in December 2016, according to analyst Patrick Carlisle of the Compass real estate firm.

“December was rock bottom,” said Chad Eng, a Redfin agent in Silicon Valley. “Buyers are hesitating, on the sidelines. Sellers are still focusing on comps from six months ago.”

Instead of selling in days like they were earlier in the year, homes took weeks or even months to sell. Homes that closed in December had been on the market 29 days before getting into contract. That was up from 23 median days on market in November and 17 in December a year ago, the Realtors association reported.

Eng said things picked up around the middle of January, as the stock market recovered and mortgage rates fell back into the 4.5 percent range. “I wonder if it’s a sign of what we will see in the spring,” or just a normal seasonal rebound, he said.

Santa Clara County was the hottest market in the Bay Area — and most of the country — for the first part of the year as prices rose in the teens and 20s year over year. In February, its median price topped $1 million for the first time, rising to $1,080,000, up 27.8 percent.

That was the month a two-bedroom, one-bathroom, 848-square-foot home on Plymouth Street in Sunnyvale sold for $2 million cash — making headlines as the height of Silicon Valley insanity.

That was and still is a record price-per-square-foot for Sunnyvale, said Doug Larson, a Coldwell Banker agent, who represented the seller. “Now with the softening market, I doubt that anybody will beat it, at least for a while,” he said.

After hitting $1.15 million in June, Santa Clara’s median price has fallen to $1 million in December, exactly where it was a year ago.

January is always a slow month for the real estate market, as sellers recover from the holidays and get their homes spruced up for the busy spring season.

“Homes that sell in the winter are typically homes that have been sitting on the market awhile and have to take a price cut,” said Redfin Chief Economist Daryl Fairweather.

Right now, “buyers are in a holding pattern,” she added. “They don’t know if this is as good as it’s going to get, if prices come down or more homes come on the market.”

She noted that a slower market is good for buyers because “they have more negotiating power” and for sellers who are moving up to a more expensive home because “overall they are going to be saving more money.”

Fairweather predicts that prices will end the year about where they are now. “I would be surprised if they go down,” she said.

Nancie Allen, president of Bay East Association of Realtors, said the government shutdown in January made it hard to tell where the market is headed. The next two weeks will be a better indicator. The market now “is all over the place,” she said. Some homes in Fremont have been sitting on the market for a while, while one had 15 offers.

Aaron Terrazas, a senior economist with Zillow, said his data show that home prices in the last quarter of 2018 rose at their slowest annual pace for any quarter since 2010.

He predicts that prices will appreciate 5 to 6 percent this year in the San Francisco metro area and 7 to 8 percent in the San Jose metro area, assuming interest rates stay low.

Share of Homes Selling Above List Price Plummets

By Treh Manhertz, Zillow, on Feb. 1, 2019

After years of progressively more homes selling above their listed price, the share of homes that sold above list plummeted in the second half of 2018.

As of December, 19.4 percent of homes were sold above their list price, the lowest share of above-list sales in almost three years. December marked the seventh straight month in which this rate dropped, after the share of homes selling above list reached 24 percent in May 2018 — the highest share since the onset of the housing market recovery.

The high peak and subsequent fall signify changing trends that occurred across the national housing market in 2018. When many homes are selling above their list price, it can indicate other housing trends:

  • First, it can show that inventory is limited, that too few homes are available to accommodate all the buyers in the market. The scarcity pushes more buyers to submit bids over the listed price of the home to edge out competing offers.
  • The rush to buy can be exacerbated by low mortgage interest rates, like the historically low rates of the past several years. Buyers are able to accommodate larger mortgages while monthly payments remain affordable.

Both of these factors shifted in late 2018. Mortgage rates reached above 4.9 percent in November, the highest level since 2011, causing some buyers to be more conservative in their bidding. The last months of 2018 also saw the first inventory gains in three years, alleviating some of the competitive pressure on buyers.

The converse of this is that sellers’ expectations of what their homes will sell for are undershooting reality. Sellers generally want to price as high as is reasonable, unless they want to sell especially quickly. More homes selling above list means sellers aren’t reaching as high as they could. In some hot markets, a decrease in the number of homes sold above list could simply mean that sellers’ expectations are finally catching up with the reality of the market.

Not only did the share of homes that sold above list fall, the average price above list dropped too. Among homes sold above list, the typical amount above list has remained above $6,000 for the last several years. As of December, the median amount had dropped to $5,860, while the median discount for homes selling below list held steady. This narrowing suggests buyers and sellers are syncing up on their price expectations.

The share of homes sold above list nationally has moved within the range of 15 percent and 25 percent since at least 2012. But, while national trends in home sales have been strong and limited in fluctuation, separate metropolitan areas have highly individual sales patterns. In some metro areas, homes sell above list with much higher frequency and with very little variation. Dallas, for example, has stayed stable at more than 35 percent of homes selling above list since 2012. Salt Lake City has rarely dropped below 50 percent of homes bid up. In other metros like Tampa and Pittsburgh, this is much more of a rarity, with the share hardly ever exceeding 15 percent.

Large West Coast metros led the drop in homes bid up nationally – another sign that these exceedingly hot markets are cooling. All major West Coast metros had large year-over-year dips in December, the largest in San Jose, Calif., San Francisco and Seattle, where huge swaths of the market shifted to selling at or below list price. San Jose fell 46.6 percentage points (from 82.9 percent to 36.3 percent), San Francisco fell 26.7 points (from 69.3 percent to 42.6 percent) and Seattle fell 25.7 points (from 50.3 percent to 24.6 percent).

Many other metros stayed stable, and a few even went the opposite direction from national trends. Four of the largest 35 metros had increases in the share of homes that sold above list in the second half of 2018: San Antonio, Houston, Philadelphia, and Kansas City. San Antonio and Houston gained more than 3 percentage points each in the last six months, despite increasing home inventory. San Antonio is demonstrating strong demand commensurate to its rapidly growing population – Bexar County is in the nation’s top 10 fastest growing counties. Houston’s economy is closely tied to the oil industry. Because of that, it is possible sellers did not seek as high a price due to falling oil prices, expecting a slowdown in housing demand that did not manifest.

Ending 2018, homes are still selling quickly. The median time on the market was 78 days, 3 days shorter than last year and 20 days shorter than five years ago. So while the seller’s market appears to be waning, it’s certainly not over, and this is not a result of weak demand. Homes are more likely to sell at the listed price as a result of convergence in the market expectations of buyers and sellers.

Stop deepening Bay Area transportation, housing crisis

By Daniel Borenstein, CC Times, January 29,2019

Tired of subsidizing irresponsible billionaires? Here’s a plan to provide more housing in the right places

Here’s an idea to address the Bay Area’s transportation and housing crisis: Stop making it worse.

Since the Great Recession, the Bay Area has added 722,000 jobs but constructed only 106,000 housing  units.

Little wonder rents and home prices have soared – and even people with jobs live in cars or on the streets. Little wonder freeways are gridlocked and commuter trains are packed.

It’s time to stop digging this housing deficit hole deeper. We need more housing. But we need it in the right places.

Bay Area cities with housing shortfalls – San Francisco, Cupertino, Menlo Park and Palo Alto, for example – should stop adding more buildings for jobs unless they provide commensurate new housing.

Conversely, areas with serious job deficits – East Contra Costa is the poster child – should be barred from adding new housing without  new places for residents to work.

Here’s the fundamental problem: San Francisco and most of Silicon Valley generally have more jobs than workers living there. The East Bay has more workers than jobs.

Consequently, our freeways and public transit systems overflow in the morning with commuters headed toward San Francisco and Silicon Valley. In the evening, the crush runs in the opposite direction.

And the intra-county imbalance between jobs and housing exacerbates the gridlock. For example, in Santa Clara County, while Palo Alto imports workers every morning, San Jose exports them.

We keep raising taxes to increase commute capacity, but long-term that’s an exorbitantly costly fool’s errand – especially when we ignore underutilized capacity in the counter-commute direction. We are only making the situation worse.

The key is to put jobs next to housing and housing next to jobs.

That won’t happen on its own. Our convoluted property and sales tax systems discourage housing construction. So, this will require action by the Legislature and Gov. Gavin Newsom.

What’s needed are rules that prohibit cities with housing deficits from approving commercial and office buildings unless they also approve new housing for employees who would work in those buildings.

And in cities with severe job deficits, the rules should be reversed. Residential development approvals should require construction of commensurate facilities for jobs.

Before business leaders, especially from tech companies, and local politicians howl about killing economic growth and impinging on local control, they should admit that they’re a big part of the problem.

They should recognize that current unaffordable housing prices and ridiculous commutes already threaten to undermine the long-term success of the region.

And they should acknowledge the obvious, that companies keep expanding – and local governments keep letting them – without meaningful regard for providing adequate housing.

For example, Cupertino, even before the opening of the massive new Apple campus, had 1.5 jobs for every member of the labor force who lives in the city, according to 2016 U.S. Census data compiled by the Metropolitan Transportation Commission. Palo Alto had 2.8 jobs per worker; Santa Clara and Mountain View had about 1.7 jobs per worker; and San Francisco had 1.3.

Conversely, in the South Bay, San Jose, with a 0.8 ratio of jobs to workers, needs more employers. In the East Bay, the same goes for Oakland, at just below 0.9 – that’s nine jobs for every 10 residents in the workforce.

And, in East Contra Costa County, the cities of Pittsburg, Antioch, Oakley and Brentwood should be prohibited from approving more housing. They have a combined ratio of 0.4 – just four jobs for every 10 residents in the workforce.

It’s absurd. For more than four decades, leaders of those four cities, backed by politically powerful developers, have tried to convince voters that if they keep building residential homes the jobs would follow. It’s not going to happen.

As for cities with job surpluses, state mandates requiring commensurate housing would force employers wanting new space to partner with housing developers to ensure homes are built. Or, better yet, those employers might opt to locate where workers already live.

Either way it would ease future stress on our transportation systems – and environment. As a taxpayer, I’m tired of paying for more road and transit expansions to meet the needs of multi-billion-dollar companies that refuse to do the responsible thing.

Some caveats to the housing mandate: The affordability of the required housing should be matched to likely jobs that would fill the new offices and commercial centers. And, to encourage public transit use, the mandates might include leeway for homes or business construction near commuter rail stations or existing major bus corridors.

Local and state leaders understand the Bay Area faces a housing crisis. Unfortunately, solutions under discussion are incremental steps that don’t address the fundamental problem: Not only have we failed to build enough housing, we’ve also failed to put it near jobs. It’s time to fix that.

The Bay is rising. Where does that leave a wave of big waterfront projects?

By Blanca Torres  – San Francisco Business Times, Jan 24, 2019, 

Water defines the Bay Area, even its name. For most if its history, though, much of the bayfront was closed off to residents. In the 1960s, only about four miles of the 400 to 500 miles of shoreline was accessible.

Today, the bayfront looks far different and another wave of change is coming. A slew of small and large development projects promise to bring tens of thousands of new homes, millions of square feet of commercial space, and hundreds of acres of public parks, trails and open space to the Bay Area’s waterfront.

Across the region, developers plan to pump billions of dollars into high-profile waterfront projects that include Brooklyn Basin, Oakland’s largest housing development; the Chase Center professional basketball stadium in San Francisco; the revival of Pier 70 in San Francisco’s Dogpatch; and the 42-acre master-planned Hercules Bayfront community with more than 1,500 homes planned and 200,000 square feet of commercial space.

But all these projects come just as developers, public officials, planners, architects and engineers urgently confront a looming threat: rising sea levels. With the Bay expected to rise up to 10 feet in the next eighty years, it might seem foolish or dangerous to plant so much development right along the water’s edge.

“We can ignore sea-level rise until it is way more costly or we can starting thinking about adapting to and anticipating it now,” said Amanda Brown-Stevens, who runs Resilient By Design, an organization that studies and advocates for sea-level rise solutions in the Bay Area. The organization conducted a year-long competition to spur ideas and proposals for waterfront developments that address rising water levels.

With the right planning, project designs and innovative construction, new developments can not only survive the effects of climate change, but in some cases, can help protect the region from flooding and erosion.

“There is a win-win in what is an overall gloomy topic,” Brown-Stevens said. “We can reconnect the Bay Area with the waterfront — it’s a great amenity — if we do it in a way that creates more green spaces and development opportunities to live and work in the existing urban areas and reduce sprawl.”

The threat 

A 2018 state report on sea-level rise estimates that waters will rise 1.1 to 2.7 feet by 2050 and between 2.4 and 10.2 feet by 2100. The range depends on factors such as how sharply greenhouse gas emissions are curbed over the next several decades.

Water levels also fluctuate based on weather, storms and king tides, unusually high tides that periodically crest.

“People think of sea-level rise as a problem that’s going to grow and grow over the next century, but we’re dealing with it now. We’ve had flooding with recent storms,” said Michael Martin, director of real estate and development for the Port of San Francisco. “When you have a built environment on the water, these are issues we have to deal with on a day-to-day basis.”

As a general rule, developers and project planners use the benchmark of 2 feet of sea-level rise by 2050 and 6 feet by 2100 to plan their projects based on state guidelines, said Richard Kennedy, a senior principal at architecture and planning firm James Corner Field Operations. He is working on projects including the 28-acre Pier 70.

“We find that the clients, the developers, public agencies, we are all aware of the issue, but much of the public is not, so much of our work is communicating the threat and risk,” Kennedy said. “In some ways, (sea-level rise) is not frightening enough. If there is not enough fear or concern to provoke action, we might be in a situation of not acting fast enough.”

Last fall, San Francisco voters approved Proposition A, which will raise $425 million to pay for repairs for a concrete seawall that runs along the Embarcadero. That money is just a start — the total cost of repairing the 3-mile-plus seawall is $5 billion. And that just protects one section of San Francisco.

Water isn’t just rising in the bay. Groundwater levels are also rising and causing more flooding in low-lying areas such as BART stations, waterfront roadways and the Oakland Coliseum, Brown-Stevens said. Walls and levies can’t help with mitigating those issues.

“We have a hard time even investing in our current infrastructure needs let alone thinking about how can we rebuild it in a way that is adaptable to climate change,” she said.

Double Trouble: rising water and sinking land 

At the same time seas are starting to rise, some of the Bay Area is sinking. Scientists from the University of California, Berkeley, and Arizona State University published a study last year on “subsidence,” which refers to land that is sinking. The study identified areas such as Treasure Island and Foster City where land levels are going down. Those sites and many others along the bay shoreline were originally part of the bay that was later filled in to create more land. Infill in general is not as stable as natural land and is also prone to liquefaction during earthquakes.

Return to the water

Starting in the 19th century, much of the region’s waterfront was devoted to industrial uses and highways, said Sandy Mendler, principal with architecture firm Mithun, who participated in the Resilient by Design challenge.

“Homes were cut off from the waterfront, and you couldn’t access the bay or see it except from driving,” she said. “The shift toward development near the water, it seems like a natural progression that will only accelerate. There are not many big sites in other places, and there is still demand for places to live and quality of life.”

Waterfront projects pose more challenges and costs than building on other sites, but they are worth the trouble, said Mike Ghielmetti, head of Signature Development. The company spearheaded Brooklyn Basin, a master-planned community in Oakland slated for 3,700 homes along with a new marina, retail space and 30 acres of open space.

“People want to live closer to transit and existing infrastructure,” he said. “Just because we don’t know exactly what’s going to happen, we can’t stop developing. We have a severe housing shortage in the Bay Area.”

Enjoying the water — the views, water sports or hiking — is part of the Bay Area’s culture and allure, said Lou Vasquez, founder and head of Build. His firm is developing India Basin, a 1,500-home development on San Francisco’s southern waterfront.

“You don’t feel the urban crowd that you feel in other neighborhoods,” he said.

Being close to the water also opens up more transit options for prospective residents such as using water taxis or ferries to commute.

The solutions 

The first homes in Brooklyn Basin will open later this year after nearly two decades of planning. The project was the first major development that had to address sea-level rise to secure city and regional approvals, Ghielmetti said.

One of the key strategies at Brooklyn Basin was to truck in dirt to raise the site by three feet, a common solution at various Bay Area developments.

The same method is being used on Treasure Island, where developers Lennar and Wilson Meany are preparing sites for 8,000 new homes, 500 hotel rooms, 300 acres of parks and open space, 140,000 square feet of retail and 100,000 square feet of office space to be built over the next 20 years at a cost close to $5 billion.

On Treasure Island, a man-made island in the middle of the Bay, the developers also situated much of the new construction away from the shoreline.

Other projects such as India Basin and Pier 70, both on San Francisco’s southern waterfront, are also using terraced designs with homes perched on sites that already sit significantly higher than the water.

“No one wants to build something that will be obsolete in 10 years,” Vasquez said. “We’re all building with a 100-year horizon…. (Sea-level rise) is more of a problem for existing buildings than for new construction. We can pull back from the shoreline and build to a higher level.”

Plans for Pier 70 call for 2,150 new homes, 1.75 million square feet of commercial office and up to 445,000 square feet of retail, light industrial and arts space. The total cost of the project, including infrastructure and public benefits, is estimated at around $2 billion.

The project incorporates historic finger piers, renovation of historic buildings and construction of new buildings.

Pier 70’s approach is three-fold: elevate, set back and buffer, said Jack Sylvan, senior vice president of development for Brookfield Properties, the master developer of Pier 70.

The developer will elevate the entire site by five to 10 feet. Buildings will sit at least 100 feet from the water’s edge. That gives the developer space to add retaining walls or levies in the future if necessary.

The goal for the project’s design “is to maximize public access today, while designing a shoreline that can adapt and retreat over time,” Sylvan said

Back to nature

Another way to address sea-level rise is via wetlands and marshes, known as a horizontal levy or a more back-to-nature approach.

In 1849, the San Francisco Bay spread out over 787 square miles, according to the Bay Conservation and Development Commission, a regional agency that regulates waterfront development and restoration. Today, after decades of filling in the water to create more land, the bay is only 550 square miles. Much of what was filled in were wetlands and marshes that helped control flooding. Also, many creeks and waterways were paved over, limiting the natural water flow.

“If you have more wetlands, they can absorb some of the water so it reduces your need for a higher levy or wall protection,” Brown-Stevens said.

How and when the water will rise is uncertain, which means all the planning and work developers are doing now could be insufficient.

“You have to have flexibility,” Ghielmetti said. “We did meet the guidelines of that BCDC adopted for climate change and sea-level rise. We can also adapt if it’s worse.”

Brooklyn Basin and Pier 70 both have a financing mechanism in place to direct future tax revenue to pay the costs of future sea-level rise.

“On the one hand, sea-level rise is a technical challenge, on the other hand, it’s a creative one,” Kennedy, the architect, said. “There is no one solution … Continuing to look for creative solutions is absolutely critical.”

Chinese Exiting U.S. Real Estate as Beijing Directs Money Back to Shore Up Economy

Third-straight quarter Chinese investors sold more commercial U.S. property than they bought

By Esther Fung, Wall Street Journal, Jan. 29, 2019

Chinese net purchases of U.S. commercial real estate last year dwindled to their lowest level since 2012, as Beijing kept up the pressure on Chinese investors to bring cash home during a period of worsening economic growth.

Insurers, conglomerates and other investors from mainland China were net sellers of $854 million of U.S. commercial property in the fourth quarter, according to Real Capital Analytics. That marked the third-straight quarter Chinese investors sold more U.S. property than they bought, the first time ever these investors have been sellers for that long a stretch.

The selling during most of 2018 marked a powerful reversal from the previous five years, when Chinese investors went on a massive buying spree, often handily outbidding other investors for U.S. trophy properties. They spent tens of billions dollars on luxury hotels like the landmark Waldorf Astoria in New York, a nearly $1 billion skyscraper development in Chicago, and a glitzy residential project in Beverly Hills, Calif.

Now, many of China’s biggest overseas real-estate investors are unloading some of the same prized assets, or at least reducing their U.S. exposure by selling stakes to new partners.

The turnabout last year reflects an effort by the Chinese government to stabilize its currency, reduce corporate debt, and help arrest the country’s economic slowdown by clamping down on certain overseas investments. Some Chinese developers, now facing tighter credit conditions at home, have tried to raise money instead by selling some of their U.S. properties.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

 


Posted on February 13, 2019 at 9:52 pm
Glen Bell | Posted in Uncategorized |

SF East Bay Real Estate – City by City 5 Year Median Price Comparison

The San Francisco East Bay Real Estate Market has enjoyed a very strong upswing in home prices over the last 6 years with many cities reaching new highs in price. The spreadsheet below gives you a better perspective of how each city has performed on a year by year basis. The median prices listed below are based on the annual sales of single family homes within each city.

 


Posted on January 9, 2019 at 12:27 am
Glen Bell | Posted in Uncategorized |

Glen’s December 31st, 2018 San Francisco East Bay Real Estate Market Update

 

December 31, 2018 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Here are some highlights for the 38 East Bay Cities that I track:

 

Affordability, rising interest rates, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

 

  • Here’s where we stand as of the end of December. Typically, we see a dramatic drop in inventory during this time of year. This December was no exception. Inventory was reduced by 37.3%, now to a 27 day supply of homes for sale, (compared to last month’s 42 day supply for November). However, that’s still more than what we saw happen last year at this time, where we were sitting on only 14 day supply. Pendings came down as well but at a slower rate, at 26.7% lower. This created an uptick in the pending/active ratio to .94, an improvement, but still below our neutral mark. That uptick is normal as well for this time of year. However, our ratio last year at the end of December was a whopping 2.11, well into “seller” market territory. This is the sixth month in a row that the ratio falls under 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers as has been the case now for quite some time. A number below 1 favors buyers. In short, we have moved from a strong seller’s market since the beginning of summer towards a more normal and balanced market, and in many cases, now favoring buyers.

 

  • The percentage of homes “sitting” has increased to 74% of the homes listed now remaining active for 30 days or longer, while 47% have stayed on the market for 60 days or longer. This is higher than last year at this time with 63% of the homes listed remaining active for 30 days or longer, while 37% stayed on the market for 60 days or longer. There’s a seasonal reasoning for having so many homes sit during the month of December. Agents will advise their clients to wait on listing their home until spring and avoid the lack of interest that we usually see with buyers during the busy holidays. So very little “new” inventory comes on to the market and those “stale” homes that were not moving before remain as the bulk of our inventory. This will begin to change as many new listings come up in January and February.

 

  • It’s hard to predict how much tax reform will play into this but see the article, “Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee.” We are seeing interest rates starting to go up. Prices have continued to rise and are only now beginning to flatten out. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.

 

  • The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

 

  • The month’s supply for the combined 39 city area is 27 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 12 days.

 

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 1,765 homes actively for sale. This is higher than last year, at this time, of 868 or (103% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 1,662, less than what we saw last year at this time of 1,830, or 9.2% lower.

 

  • Our Pending/Active Ratio is .94, the lowest December since 2010. Last year at this time it was 2.11.

 

  • Sales over the last 3 months, on average, are 2.2% over the asking price for this area, lower to what we saw last year at this time, 3.8%.

 

Recent News

 

Redfin’s 2019 Predictions: Housing market will be coolest we’ve seen in years, but homeownership will continue to rise

By Daryl Fairweatheron, Redfin, December 19, 2018

 

We predict that the housing market will continue to cool into the first half of 2019. Inventory will rise back up to 2017 levels, and price growth, while likely still positive, will be the lowest we’ve seen since 2014 or possibly even 2011. Investors and house-flippers will back away from the cooling market, and real estate companies that buy homes from consumers to quickly sell at a profit (including our own RedfinNow) will face their first serious test. Tech companies and local governments will continue to go head to head on local housing issues.

Prediction #1: The housing market will continue to cool

Over the first half of 2019, home-price growth will stay slow. Our forecasts have price growth settling around 3 percent, which would be the slowest price growth we’ve seen in years. As recently as the first half of this year, prices were still growing 7 percent, and price growth has reliably exceeded 5% since the start of 2015. There’s quite a bit of uncertainty around our price forecast; there’s a real chance prices could fall below 2018 levels, putting up negative growth for the first time since 2011.

Sellers will have to adjust their price expectations as buyers grapple with rising mortgage rates and already-high home prices. Metros that saw the most price growth in the first half of 2018 will experience the biggest slowdowns in price growth in the first half of 2019. SeattleSan FranciscoSan JosePortlandSan DiegoLos AngelesDenver, and Honolulu are a few of the metros where we expect demand to cool the most. “A few weeks ago I helped my home-buying customers get a bid accepted that would have gone straight to the bottom of a pile of offers earlier this year,” said San Francisco Redfin agent Anna Coles. “The offer for a house in desirable Parkside was below list price and included a financing contingency, which allows the buyers to back out of the contract without forfeiting their earnest money deposit on the off-chance their loan doesn’t get approved. The norm for the past two-plus years had been that buyers had to waive standard protections like this in order for a seller to consider their offer, but this is just one sign that buyers may face less competition heading into 2019.”

On the flip side, we expect home prices to continue to grow at a strong pace in a handful of small, affordable, inland markets like BuffaloRochester and Greensboro, where the market is still heating up.

We’re going into 2019 with a 5 percent greater supply of homes for sale than we had going into 2018, which is the highest growth we’ve seen since September 2015, but home sales were down 8 percent since last year in November. A still-growing economy and increased access to credit will support more home buyer demand, but higher interest rates will make home-buying more expensive, so it’s hard to say whether home sales will stay down or rebound next year.

Prediction #2: Homeownership rates will continue to rise

Whether total home sales go up or down, more homes will be sold to people who plan to live in the home as opposed to investors, which will cause the homeownership rate to rise. In 2019, homebuyers will enjoy more inventory and less competition from speculators and house-flippers, which will lead to more people enjoying the benefits of homeownershipHomeownership has been consistently growing from its post-recession valley of 63 percent in 2016 to above 64 percent this year. We predict the homeownership rate will grow more rapidly in 2019.

Prediction #3: It will cost more to borrow, but more people will have access to credit for home-buying

Homebuyers have already seen mortgage interest rates increase in 2018, and the Fed’s most recent comments indicate that it will continue to raise rates perhaps twice or more in 2019, which will push the average 30-year fixed mortgage rate up to about 5.5 percent by the end of the new year. This increase from the sub-5 percent level where rates have been hovering in recent months would mean about a $100 increase in monthly mortgage payments on a $300,000 home by the end of 2019.

Lenders will also feel the effects of rising rates, which will increase their costs of lending and dampen demand for their services. This will motivate lenders to expand their customer base to low-income borrowers and first-time homebuyers. But of course, lenders will charge more for these loans–both to cover the risk of lending to borrowers with less-than-perfect credit and to cover their own costs of borrowing.

Prediction #4: A cooling housing market will dampen economic growth only slightly

In 2018, economic growth was the strongest it has been since early 2015. However, residential investment, which includes money spent on construction, renovations, and real estate commissions, and typically makes up about 15 to 18 percent of economic activity, declined slightly in 2018. In 2019, the economy will most likely grow, but a cooler housing market will contribute less to the overall economy. Even if residential investment were to fall by 10 percent, which has only happened three times in the last 40 years, total economic activity would be impacted by 1 to 2 percent. That isn’t enough to cause a recession as long as the rest of the economy keeps growing.

There could be some spillovers from the cooldown in the housing market to consumer spending. When homeowners see homes sitting on the market longer and sellers dropping their prices, they feel less wealthy. Rising interest rates will also impact more than just home sales. It will be more expensive to finance a car loan, take on credit card debt, or refinance a mortgage to take out equity, which will also weaken consumer spending.

Prediction #5: Fewer homes will be built, but more builders will focus on starter homes

In 2019, homebuilders will be more cautious about building during a cooling market and focus on building starter homes that are easier to sell than luxury homes. We have already seen the per-unit value of single-family residential building permits flatten, and we predict per-unit values of building permits will decline in 2019. Another factor in 2019 will be low unemployment, which will finally cause wages to rise for low-income workers. This will impact both the supply of and demand for housing. On the supply side, higher labor costs will limit the number of homes built. Meanwhile, higher wages will be a boon to demand for starter-homes among working-class Americans.

“When we decided to plan our first new construction development, we found a niche in the $300,000 price range in Dallas, where there is a great deal of activity among national and local builders, but almost all of it focused on the high end,” said Pushban Rajaiyan, the lead developer on Brentwood Court by Havendale Homes, a townhome community now available for pre-sale. “It was important to us to offer homes built with high quality materials but for an affordable price and in an area where residents can enjoy nearby amenities and short commutes. Just in the past few months we’ve already begun to see other builders catch on to this unmet need in the market, with other affordable, starter-home options coming available to local buyers soon.”

Prediction #6: Institutional buying faces its first serious test

If home-buying demand falters due to higher interest rates and stock-market volatility, the trend toward instant offers from institutional homebuyers could face its first serious test, a test of pricing algorithms as much as companies’ appetite for risk. Armed with billions in capital, competitors from Opendoor to RedfinNow to Zillow to Offerpad to Knock have been vying with one another to buy homes from consumers and then sell those properties at a profit, with i-buyers’ combined share of U.S. home sales growing rapidly. The question investors are asking is whether instant offers will now be significantly lower, to compensate institutional buyers for the market’s recent uncertainty, and whether homeowners will accept the offers, just to avoid those same uncertainties themselves. Institutional buyers who made money from nearly every sale in a rising market with low interest rates could start to face losses, or may demonstrate more discipline than other housing investors. In 2019, we’ll find out. If i-buying works in a bear market as well as it has in a bull market, instant offers could become a major, permanent sector within the real estate economy. If it doesn’t, a lot of money is going to sink into the sand.

Prediction #7: Tech and local government will go head-to-head on housing

Cities have been struggling with the double-edged sword of tech-company-driven prosperity and inequality. Tech companies bring highly skilled workers to cities and pay them handsomely. This is why 238 cities vied for Amazon’s HQ2. But, shortly after the HQ2s were announced, residents of Long Island City began protesting, advocating for more housing investment to avoid displacing existing residents. Crystal City has planned ahead with 4,000 new housing units, but Amazon plans to hire 25,000 people there. Growing cities will have to start building more housing now if they don’t want to face the affordability and homelessness problems that established tech hubs like Seattle and San Francisco are currently facing.

2019 Predictions: Worse Affordability, Commutes, Natural Disaster Losses

By Aaron Terrazas, Zillow, Nov. 28, 2018

Rising mortgage rates will set the scene for the housing market in 2019. They will affect everyone, driving up costs for home buyers and creating more demand for rentals. Even current homeowners could start to feel locked into their mortgage rates.

Here’s a snapshot of what’s in our crystal ball:

Mortgage affordability takes a hit

Despite steady climbing for the past two years, mortgage rates remain lower than they were during most of the recession and below average for the type of strong economic growth we’ve been experiencing. That will change in 2019, as the 30-year, fixed rate mortgage reaches 5.8 percent – territory not seen since the dark days of 2008, when rates were racing downward in response to the housing crisis. In 2019, rising rates will compound the effect of still-climbing home values, making homeownership even less affordable. Already, rising mortgage payments eclipse home-value gains, a phenomenon that can both encourage homeowners to stay put – to hold onto low mortgage rates that are disappearing in the rear-view mirror – and discourage would-be first-time home buyers.

Rents reverse course

Although rising mortgage rates will affect home buyers first, renters will not be far behind. As higher rates limit the number of homes that potential buyers can afford, some would-be buyers will be too financially stretched to buy and will continue renting. As a result, recent (and very slight) drops in rent will reverse and turn positive again. The shift will be muted, however, by continued steady investment in apartment construction, which will prevent rent growth from shooting too far above income growth. In the third quarter 2018, the U.S. median rent cost 28.2 percent of the U.S. median income – considerably higher than the 25.8 percent renters paid historically.

Commutes get worse

Job creation has been concentrated in urban cores, and so has the affordability crisis – a phenomenon that’s increasingly pushed people to nest and grow their families in the suburbs. The disconnect between urban jobs and suburban residents will continue in 2019 and contribute to longer, more crowded commutes. This may be especially daunting for people in markets where living within their means already requires lengthy travel times: A home in central Boston, for example, is valued 303 percent more per square foot than a typical outlying home, while the premium for homes in central Washington, D.C., compared to outlying areas is 218 percent per square foot. Politicians in Washington, D.C. and state capitals around the country are talking up new infrastructure investments, but some may be too little too late given rising construction costs and planning delays.

Amazon HQ2 ‘losers’ see a boost

Spurred by the possibility of attracting tens of thousands of jobs from online retail giant Amazon, some areas that lost their headquarters bids to suburban New York and Washington, D.C., nevertheless got in touch with their inner can-do – and that will pay off.

Shortly before Amazon made its big announcement, Chicago debuted its “P33” initiative, aimed at becoming a tech hot spot by the city’s bicentennial in 2033. It’s been dubbed the “Burnham plan for Chicago’s tech future,” a reference to Daniel Burnham, whose 1900 attempt to create “Paris on the Prairie” both beautified the city and made it a force in urban planning.

Former Amazon HQ2 contender Atlanta already has seen some action since it was passed over by the Prime vendor: Convoy, a much smaller Seattle-based company, is opening its East Coast office there. Norfolk Southern may relocate its headquartersthere from the city for which it is named, Norfolk, Va.

While New York and D.C. weigh what Amazon’s arrival means for them, could even Tucson could find a taker for its 21-foot saguaro cactus?

Natural disasters claim a record number of homes

This prediction for 2019 is a logical extension of what’s already been happening: About 15,000 homes were destroyed by wildfires in California alone in 2018 – including at least one entire town in what used to be the “off” season – and many others by storms along the gulf coast.

As the frequency and magnitude of natural disasters continues to escalate, builders and developers will focus on preventative and/or protected building materials and designs. While in the past, builders have returned quickly in the aftermath of natural disasters – typically building nicer and more expensive homes than before – that may not be the case going forward. Building costs are on the rise, and insurers are increasingly reluctant to offer policies in danger zones (or are charging higher premiums to do so) – both of which could translate into slower and costlier rebuilding.

Flood losses are growing as well, and projections for homes inundated by rising sea levels and storm surges over the course of a typical 30-year mortgage begun in 2020 are not encouraging.

Home value growth slows

One mitigating effect to rising mortgage rates will be slower home value growth. In October, home values were up 7.7 percent from a year earlier, to a U.S. median of $221,500. Zillow forecasts growth of 6.4 percent from October 2018 to October 2019; a Zillow survey of housing experts and economists anticipates a 3.79 percent increase for calendar 2019. Both forecasts indicate cooling from red-hot growth of 8 percent in March of this year.

 

C.A.R. 2018 State of the Housing Market,

Study of Housing: Insight, Forecast, Trends

The tight supply issue that has been lingering on for years has finally turned into a demand issue. With the economy growing at a solid pace and new households continuing to form at the fastest pace in the last 10 years, home sales in 2018 were projected to increase from the prior year, despite an anticipation of interest rate hikes. The Tax Reform and Jobs Act passed at the end of last year was expected to have a negative impact on the supply and the demand of housing, but overall sales were still forecast to inch up from 2017. Up until April, the market performed in line with our prediction for the most part, and California was on track to have another year of gain in both sales and price.

Then something happened in May. Housing demand began to shrink as buyers became more cautious with their buying decision. Sales dropped on a year-over-year basis for four consecutive months and at a pace that warrants many to be concerned. Home prices continued to increase but at a decelerated pace. Housing supply, which had been declining consecutively for almost three years, bounced back, registering double-digit growth. All signs seem to suggest that the market is losing momentum, and that California is experiencing a sustainable slowdown.

A softening of the market is undeniably underway. The questions are how big of an impact the transition is going to have on the market and how long will it last. This report uses monthly transactional data and results from the Annual Housing Market Survey collected by the California Association of REALTORS® (C.A.R.) to get a better understanding of the current market conditions and to shed some light on how the ongoing transition might have affected home buying and home selling behavior.

KEY HIGHLIGHTS

  • Home sales in California have hit some rough patches in recent months, and the latest fallout could be a sign of a sustained market shift. As of August, the market was down 2.1 percent compared to sales in the first eight months of 2018.
  • Several factors contributed to the softening of the market: interest rate volatility, sales being pulled forward in anticipation of higher rates in the future, and the continuous constraints on housing supply. The erosion of affordability, however, is really what’s driving the market.
  • With housing affordability expected to deteriorate further, the lackluster performance in home sales will continue into 2019. While the economy will remain solid, the increase in housing demand will go unmet, as the erosion of affordability continues to leave potential buyers either unwilling or unable to buy.
  • Home prices in California reached a new high. The statewide median price surpassed its prior peak set in May 2007 for the first time in May 2018 only to exceed it a month later with a new record high of $602,760. Despite setting a new high, the strong growth trend in prices may have already peaked. With inventory growing, the appreciation in home prices is softening and should continue to decelerate in the upcoming year.
  • Results from the latest annual housing market survey indicate that housing affordability was the primary reason for 28 percent of homebuyers to move out of the county where they previously resided, an increase from 21 percent in 2017. The outmigration trend was worse in both the Bay Area and the Southern California region, with 35 percent of homebuyers moving out of the county in which they previously lived because of the housing affordability issue. Housing affordability was an even bigger problem for first-time buyers, as nearly half of them cited the issue as the main reason for their outmigration move.
  • Despite tough market conditions, more first-time buyers continued to enter the housing market, and pushed the share of first-time buyers to 34.8 percent, which is the highest level since 2012. A stronger economy, more robust household growth, and an urge to get into the market before interest rates climbed further were some of the primary factors that contributed to a higher share of first-time buyers
  • The first-time buyer market was more competitive when compared to the repeat buyer market, with 62 percent of all first-time buyer transactions receiving multiple offers, 40 percent having a sold price above the asking price, and properties typically staying on the market for 12 days.
  • With fewer bargain properties being available on the market, investors’ interest in the residential market dropped in the first half of 2018. In fact, the share of sales to investors declined to the lowest level since 2009. The declining trend of investor buyers will likely remain on course in the upcoming year as rent growth flattens and the uncertainty in rent control policy continues to mount.
  • Market competitiveness varied between price segments. Properties in the upper mid-priced range — homes sold with a price between $750,000 and $1M — were the most sought after, as they were the most likely to receive multiple offers, the most likely to receive an offer with a price above the asking price, and sold the fastest.
  • While tight supply in the housing market costs more on the buyers’ side, sellers have been benefiting from the strong price appreciation resulting from the supply constraint. The median net cash gain to a typical seller resulting from a home sale in California remained unchanged from 2017 at $200,000, the highest level since 2006.
  • Sellers have not been moving as often as in previous years, with a typical seller owning his/her home for 11.5 years before selling, the highest level in at least the last 38 years. The trend was especially obvious for older generations, as baby boomers typically owned their property for 15 years before selling, while the Silent Generation held on to their properties for 30 years before selling.
  • The share of sellers who expressed interest in buying another property has been steady in the last four years and remained near the highest level since 2006. Millennials and Gen X sellers were the most interested in buying again, as nearly two-thirds of both generations said they planned to buy after selling their previous property.
  • Nearly three of ten sellers who planned to purchase a new home decided to buy in a state outside of California, an increase from 28 percent in 2017. Declining housing affordability in recent years is one of the factors that resulted in the surge in sellers wanting to move to another state.
  • Current conditions for the housing market and for real estate financing are healthier than the environment that we observed in the mid2000s before the housing market started deteriorating. In general, more buyers in Q2 2018 were putting a bigger down payment on their home purchase, and there were fewer buyers with zero down payment. The share of buyers who used a second lien to finance their property also shrank significantly from the peak of the current housing cycle.
  • A.R. projects that existing home sales in California will decline 3.2 percent in 2018 and drop 3.3 percent in 2019. Home prices will continue to rise this year, growing by a projected 7.0 percent in 2018, and a more moderate 3.2 percent in 2019.

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net


Posted on January 6, 2019 at 10:26 pm
Glen Bell | Posted in Uncategorized |

Glen’s November 30, 2018 San Francisco East Bay Real Estate Market Update

November 30, 2018 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here are some highlights for the 38 East Bay Cities that I track:

Affordability, rising interest rates, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

Here’s where we stand as of the end of November 2018 . There’s 82% more inventory now as compared to last year at this time. However, despite that increase, we’re seeing fewer go into contract. There’s 18.1% fewer pendings compared to last year. This creates a pending ratio of .71, the lowest we’ve seen since March of 2009. This is the fifth month in a row that it falls under 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers as has been the case now for quite some time. A number below 1 favors buyers. This is the case throughout the East bay with 95% of the cities that I track now having a ratio of below 1.00. In short, we have moved from a strong seller’s market since the beginning of summer towards a more normal and balanced market, and in many cases, now favoring buyers.

Some of the articles below further support this. Some key statements made;

  1. Mortgage interest rates went up from 3.90% a year ago to 4.81% as of last week. This is having an impact, real estate experts say. These increases are forcing some buyers to purchase cheaper, smaller homes and fixer-uppers in less sought-after locales. And it’s led many aspiring homeowners to go into standby mode—waiting to see whether prices will drop to make the whole thing more financially viable. With less competition come fewer bidding wars, and more inventory that isn’t being snatched up.
  2. “Prices have risen so high in some of these markets that it’s very tough from an affordability perspective [for buyers]. Fact is, prices can’t increase at record levels forever. And we may have finally hit an inflection point in many bellwether markets.
  3. More and more homeowners, fearing that the real estate market has reached its peak, are champing at the bit to sell. And that has led to a relative glut of available homes—more than even the hottest markets can easily absorb.
  4. Homes sales in October were the lowest for the month since 2011. Overall sales in Bay Area counties have dipped, year-over-year, for the last five months. Contra Costa sales slipped 10 percent, Santa Clara fell 8 percent, and Alameda dropped 9.4 percent, while San Mateo remained flat.
  5. The number and percentage of homes with a price cut surged last month to their highest level for the month of October since at least 2012 in the Bay Area and 2011 statewide. The jump in price cuts, which hit every Bay Area county, is another sign that after years of stratospheric increases, prices are leveling off and buyers are gaining a little more power in what had been a strong seller’s market.

Many economists are still predicting a recession in 2019 or 2020 and although the Real Estate Market will not be the trigger as it was in our last recession, it will be a factor. For many buyer’s there may be some opportunities to be realized, but keep in mind that for whatever modest corrections we may see, much of it may be offset by rising interest rates.

As anticipated, we repeated the dramatic drop off in inventory at year end, following our normal pattern for December, typically our low point. Although our inventory has come down slightly, (normal for this time of year), our available housing inventory is still 324% higher than at the beginning of the year, now 82% higher than where we were last year at this time.

Our monthly supply is now 42 days. Last year, our months’ supply, at this time, was 21 days. As a reminder of what we mean by “months’ supply;” If no more homes come onto the market, and homes continue to sell at the same pace as they have been over the last 12 months, then the “months’ supply,” (in this case 42 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market. September is typically our high point over the year in terms of inventory.

It’s hard to predict how much tax reform will play into this but see the article, “Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee.” We are seeing interest rates starting to go up. Prices have continued to rise and are only now beginning to flatten out. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.

The number of pendings, (homes that are in contract), decreased again. The pending active ratio decreased to .71, now at the lowest point we’ve seen since March of 2009. This compares to last year at the same time of 1.57. This supply and demand ratio signals whether we’re in a sellers’ or buyers’ market. Typically, a number well above 1, (more inventory with less pending) favors sellers. A number below 1 favors buyers.

The percentage of homes “sitting” has increased to 59% of the homes listed now remaining active for 30 days or longer, while 30% have stayed on the market for 60 days or longer. This is higher than last year at this time with 48% of the homes listed remained active for 30 days or longer, while 26% stayed on the market for 60 days or longer.

The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

  • The month’s supply for the combined 39 city area is 42 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 21 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,816 homes actively for sale. This is higher than last year, at this time, of 1,547 or (82% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 1,995, less than what we saw last year at this time of 2,433, or 18.1% lower.

  • Our Pending/Active Ratio is .71, now at the lowest level since March of 2009. Last year at this time it was 1.57.

 

  • Sales over the last 3 months, on average, are 2.8% over the asking price for this area, lower to what we saw last year at this time, 4.0%.

 

Recent News

The Housing Slowdown Is Here—and These 10 Cities Are Getting Hit Hardest

By Clare Trapasso, Realtor.com, Dec 3, 2018

Is the party really over?

Over the last decade, the seemingly unstoppable growth of the American housing market has created a bonanza for sellers, a cutthroat environment for buyers, and an endless source of fascination for just about everyone else.

It seemed to be an economic perpetual-motion machine. Could home prices in top markets really just keep going up and up … and up?

Well, no, actually. In the last few months, the real estate market has actually begun slowing down—including in some of the big cities that have been leading the go-go post-recession housing boom.

What does it all mean?

We decided to explore beyond the alarmist headlines to find the 10 metropolitan areas* that are seeing the biggest shifts—and why.

To be clear, prices aren’t always dropping in these places, which are predominantly located on the West Coast. Mostly, they’re decelerating, coming back down to earth. So bargain hunters can put their wallets away.

But in addition to a substantial increase in the number of home listings with price reductions, we found other potentially game-changing signs of market adjustments, including a surge in the amount of inventory for sale and the number of days on the market.

Here are the brass tacks: List prices only rose 7.3% nationally year-over-year in October.

While that’s certainly higher than most raises in compensation, inflation, and buyers’ comfort levels, it’s still less than the 10% annual hike the year before and the 8.2% jump the year before that.

Focus on the small victories, buyers! These markdowns can lead to more choices for those looking to purchase a home. And sellers, you’re still making bank.

“There’s a rebalancing that needs to happen,” says Len Kiefer, deputy chief economist at Freddie Mac. “Prices have risen so high in some of these markets that it’s very tough from an affordability perspective [for buyers]. … It’s not surprising to me that we’re seeing a little bit of a leveling off.”

So stash the B-word, at least for now: The dreaded Housing Bubble isn’t poised to pop. There are simply more homes for sale now and fewer buyers vying for them. In other words, the market is returning to some semblance of reality.

“Are we going off the cliff?” says Honolulu-area real estate broker George Krischke of Hawaii Living. “I don’t have a crystal ball, but I don’t think so. … It’s a temporary slowdown and may be a plateau.”

To come up with our rankings of the real estate markets that are slowing down the most, we looked at annual price, inventory, days on market, and price reduction changes from October 2017 to 2018 in our realtor.com® listings in the 100 largest metros.

Let’s take a look:

So why are these housing markets slowing down?

1. Mortgage rate increases are sidelining buyers

Unless buyers are paying all cash for their digs—not a likely scenario for most of us ordinary humans—they are probably smarting from rising mortgage interest rates. That’s because even the smallest rate hikes of just fractions of a percentage point can add hundreds of dollars to monthly mortgage payments. Over the life of a 30-year loan, it can add tens of thousands of dollars.

Here’s what’s going on: Mortgage interest rates went up from 3.90% a year ago to 4.81% as of last week. That seemingly small 0.91% increase made mortgage payments $127 a month more expensive on median-priced homes of $295,000. It adds extra payments totaling $45,540 over the life of a 30-year fixed-rate mortgage, assuming that the buyers put 20% down. And of course, the more expensive the property, the more new homeowners will be forking over.

This is having an impact, real estate experts say. These increases are forcing some buyers to purchase cheaper, smaller homes and fixer-uppers in less sought-after locales. And it’s led many aspiring homeowners to go into standby mode—waiting to see whether prices will drop to make the whole thing more financially viable. With less competition come fewer bidding wars, and more inventory that isn’t being snatched up within an hour of the “For Sale” sign going up in the front yard.

Borrowers are facing a little “sticker shock,” says Julie Aragon, a mortgage broker at Julie Aragon Lending Team in Santa Monica, CA, who works with buyers from San Diego, No. 5 on our list, and Oxnard, CA, No. 6. “They just don’t realize how much [rates] went up. Even an eighth to a quarter of a percentage point increase is going to make a big impact.”

That’s particularly true in high-priced areas like the Southern California city of San Diego, where the median price of $659,400 is more than double the national figure.

“I’ve seen people lose $50,000 in purchasing power,” Aragon says. And that’s giving buyers pause.

Higher rates are also stymieing move-up buyers who want to trade their starter homes for larger, nicer homes, but are reluctant to give up their existing low mortgage rates to do so, says Ted Wilson of Residential Strategies, a housing consultant based in the Dallas area.

The reality is that rates are still low compared to previous decades, when double-digit rates weren’t uncommon.

“Folks have been used to a world of dirt-cheap mortgage rates,” says Freddie Mac’s Kiefer. “We’re moving to a world where rates are more in line with what we’d expect to see over the long term.”

2. Prices just got too damn high

Fact is, prices can’t increase at record levels forever. And we may have finally hit an inflection point in many bellwether markets.   

“To some degree, the markets that went up the most and the fastest just pushed too hard [in prices],” says Patrick Carlisle, chief market analyst for Silicon Valley and the Bay Area at the real estate company Compass. “Over the summer, it was like something cracked, and people said ‘I can’t do this anymore.'”

In Silicon Valley’s San Jose metro area, No. 2 in our rankings, prices shot up a whopping 22.2% from 2016 to 2017. And this was already one of the nation’s most expensive places to live. But even hefty tech salaries can only stretch so far.

Add in those higher mortgage rates, and “that’s a whole lot more money that someone is going to have to spend to pay their monthly mortgage on a 1,500-square-foot, three-bedroom, two-bathroom ranch house that suddenly costs $2 million,” says Carlisle.

So is it any big surprise that about 36.8% of San Jose-area sellers have had to slash prices on their homes in the last year?

President Donald Trump‘s tax changes have also hit Silicon Valley and the Bay Area hard. (San Francisco comes in at No. 3 on our list.) Homeowners can now only deduct from their taxes mortgage interest on loans of up to $750,000, down from $1 million. This isn’t just a rich person’s problem—it’s hard to find even a modest starter home for less than $1 million in this region.

Then add in a new $10,000 cap on property and either sales or income taxes. Suddenly, owning a home is a whole lot more expensive.

The entire West Coast, long the growth capital of the United States, is showing signs of being overheated. “For everyone, there’s a maximum to what they can pay,” says Annie Radecki, senior manager at John Burns Real Estate Consulting, who covers Seattle and Portland.

3. Sellers want to cash in while they can—leading to more homes for sale

More and more homeowners, fearing that the real estate market has reached its peak, are champing at the bit to sell. And that has led to a relative glut of available homes—more than even the hottest markets can easily absorb.

“There’s a perception [among owners] that the market has had a good run and maybe it’s time to cash in,” says Honolulu broker Krischke. “The good times have to end.”

In Stockton, CA, which came in first in our slowdown rankings, price drops are common because sellers shot too high, says local agent Jerry Patterson of Cornerstone Real Estate Group. This is a city that has long been plagued by crime and poverty. But its location, about an hour and a half northeast of Silicon Valley and close to the vineyards in Lodi, CA, gave it a boost in recent years, with annual prices rising 8.2% last year and 14.3% in the prior year.

But with more homes for sale and less competition for them, “buyers are now in a bit more of a power position,” Patterson says. “[They’re] able to flex their muscles a little bit more.”

And sellers are learning the hard way that the danger of pricing their homes too high is that they can wind up stagnating on the market. “They’re entering what we call the ‘sludge,'” says Nashville real estate broker Brian Copeland, of Doorbell Real Estate. “There’s nothing wrong with their house. But that price becomes a stigma.”

4. New construction booms benefit buyers—but slow down sales

New construction in certain markets has given buyers more options—but developers may have overshot their goals, often to accommodate corporate growth. Just look at Nashville, TN, No. 4 on our list, where a new Amazon center is slated for location, and Dallas, No. 8, which has added more than 500,000 jobs in the last decade. About a third of Nashville-area home listings on realtor.com® and a quarter of Dallas-area listings are for brand-new homes.

In Dallas, “There’s more inventory than there is demand,” says Dallas-area Realtor Dee Evans of Ebby Halliday Realtors. But she’s beginning to see the pace of new construction slowing, and those extra units are being absorbed by buyers. “Hopefully, the builders will be smart about putting less new stuff up.”

A metropolitan statistical area is a designation that includes the urban core of a city and the surrounding smaller towns and cities.

Lance Lambert ran the data analysis on which this story is based.

Bay Area home sales slow, with few bargains in sight

By Louis Hansen, East Bay Times, November 30, 2018

Bay Area home sales ground down in October, with seasonal slowing and further indications that buyers are taking a wait-and-see approach before plunging into a record-setting market.

Home sales in the region dipped 4 percent from the same time last year, with more buyers sitting on the sidelines in Santa Clara, Alameda and Contra Costa counties, according to a monthly report released Friday by real estate data firm CoreLogic.

The median sale price in October for existing homes in the nine county region rose 6.9 percent over the previous year to $860,750. Real estate watchers say that is a strong showing in any normal market — but it’s the slowest rate of growth in the Bay Area in more than a year.

CoreLogic analyst Andrew LePage said price growth has slowed as buyers pulled back from sky high price tags. “There’s been a psychological shift in the market,” he said. “It can only go up, up and away for so long.”

Shoppers might find better deals in the next few months, but available homes and interest rates will influence the market. “The bad news for buyers is mortgage rates,” LePage said. “They’re facing a significantly higher monthly payment.”

Interest rates in the last year have ticked up nearly 1 percentage point, to 4.8 percent, on a standard, fixed-rate 30 year mortgage, according to Freddie Mac.

The real estate market continues to reward long-time homeowners with huge gains in property values, even as newcomers and first-time buyers are increasingly reluctant to drain their life savings and sign for big mortgages.

Median sale prices have climbed, year-over-year, every month since April 2012, a record-setting streak.

Gains in median sale prices around the Bay Area counties slowed from their scorching pace, with existing homes in Santa Clara rising 6.7 percent to $1.2 million, San Mateo jumping 8 percent to $1.45 million, Alameda climbing 5.7 percent to $861,000, Contra Costa increasing 3.4 percent to $600,000, and San Francisco rising 5.3 percent to a region-high $1.5 million.

Homes sales in October were the lowest for the month since 2011. Overall sales in Bay Area counties have dipped, year-over-year, for the last five months. Contra Costa sales slipped 10 percent, Santa Clara fell 8 percent, and Alameda dropped 9.4 percent, while San Mateo remained flat.

Local agents report less interest in open houses and more sellers forced to lower prices. Price cuts and longer sale times have become more typical, but most agents are unwilling to yet call it a buyer’s market. Home inventory, while growing, is still historically low, and the strong local economy continues to add new jobs and attract workers from around the globe.

“We’re at a point now where I think salaries just can’t keep up with home prices,” said Tim Ambrose, agent with Berkshire Hathaway and president of the Bay East Association of Realtors. “Buyers just can’t go that high any more.”

Buyers are less active during the holiday season, he said, but sellers are typically motivated if they are selling in November and December. “The market is changing,” Ambrose said. “I’m noticing it throughout the Bay Area.”

San Jose agent Jeff Hansen said the market for condos has cooled in recent months. Identical units are fetching less than they did in the summer peak. But Hansen added, “It’s not a horrible time to be selling. It’s still a seller’s market.”

Will Doerlich of Realty One Group in San Ramon said buyers are finding more choices in the East Bay, and homes are staying on the market longer. The sweet spot remains between $550,000 to $900,000 for most families, he said.

He added that concerns about future interest rate hikes “got some people off the fence.”

Mark Wong of Alain Pinel in Saratoga had a seller negotiate with a low-ball offer and reach a deal that satisfied both parties. But he said it’s not quite a buyer’s market. “The prices haven’t come down yet,” Wong said. “Not yet.”

LePage said the slow pace of sales could have been worse. The region was buoyed by transactions in Sonoma and Napa counties, which bounced back from devastating fires in 2017.

Homes in the middle and high-end of the market are moving more briskly, LePage said. About 8 in 10 homes in the Bay Area sold for more than $500,000.

Bargain hunters and first-time buyers stayed away, with sales of homes under $800,000 dropping 16 percent and under $500,000 dropping 21 percent, according to the company.

Tech wreck, worker shortage could slow California economy, report says

Kathleen Pender, San Francisco Chronicle, Dec. 5, 2018 

California’s economy is likely to slow next year, along with the rest of the nation’s, in part because it’s running out of workers, economists at UCLA said in their annual forecast for the state and nation, released Wednesday.

A further drop in the tech-heavy Nasdaq index could exacerbate the slowdown if it causes a decline in funding for tech companies, the authors said, noting that “employment in the tech industry has been one of the keys to the growth in California, particularly in the Bay Area.”

Nationally, growth “will gradually taper off in all of the major sectors of the economy,” the report said. “The economy is in the process of downshifting from the 3 percent growth in real GDP this year to 2 percent in 2019 and 1 percent in 2020. At full employment, 3 percent growth is not sustainable,” the Anderson Forecast said.

“With the Fed tightening, trade tensions rising, the impact of the fiscal stimulus coming from tax cuts and spending increase waning, financial markets will likely experience increased turbulence. Over-leverage in the corporate sector represents the major financial risk to the economy. Nevertheless, Main Street will likely experience higher real wages coming from a very tight labor market, as evidenced by a 3.5 percent unemployment rate. Thus, a good year for Main Street and choppy year for Wall Street.”

In California, nonfarm payroll employment in October was up 1.8 percent from October 2017, slightly higher than the previous year’s growth rate.

The growth in those jobs continues to be dominated by health care, leisure and hospitality, “reflecting the demand of aging and retiring baby-boomer Californians,” the report said. “However, the spurt in payroll jobs in the past three months was driven by professional, technical and scientific services,” which is heavily tech oriented. “On a percentage basis this sector is the fastest growing in the state. One of the risks to continued robust growth in the state is from a drying up of funding for this and other tech sectors,” it said.

The authors noted that tech funding is closely related to the Nasdaq exchange because rising stock prices let venture investors cash out and roll their money into new startups. Also, valuations of tech companies depend on the prevailing price-earnings ratios for tech stocks. The lower the Nasdaq, “the more difficult it will be for start-ups to obtain venture capital.”

After a 3.8 percent drop in the Nasdaq Tuesday, the index is still ahead 3.7 percent year to date.

The Nasdaq “is clearly not the only factor affecting Bay Area employment,” the report said. The Bay Area housing shortage and continued full employment “are contributory and possibly dominant factors.”

“However, venture capital and other start-up funding … has the greatest potential for dramatic swings,” it said.

That forecast calls for California’s average unemployment rate to rise slightly to an average of 4.5 percent in 2020, a rate that is consistent with full employment. “In part this is due to running out of workers. Though we expect positive net migration as well as natural population growth, it will not be enough to stem the trend of slowing job growth. Nevertheless, 2019 ought to see faster job growth in California than in the US as a whole.”

Well, this is new: Price cuts on Bay Area homes are surging

Kathleen Pender, San Francisco Chronicle, November 17, 2018 

They’re not exactly doorbuster deals, but Bay Area home sellers are cutting their asking prices at the highest rate in years.

October is typically a big month for price reductions, as sellers try to close deals before the market slows way down between Thanksgiving and early February. But the number and percentage of homes with a price cut surged last month to their highest level for the month of October since at least 2012 in the Bay Area and 2011 statewide.

The jump in price cuts, which hit every Bay Area county, is another sign that after years of stratospheric increases, prices are leveling off and buyers are gaining a little more power in what had been a strong seller’s market.

Price cuts are a leading indicator because they are reflected immediately, said Patrick Carlisle, chief market analyst with the Compass real estate brokerage.

Although Bay Area home prices are still going up on a yearly basis, home sales, median prices and days on the market are considered lagging indicators because it can take a month or longer for deals to close.

In San Francisco, the number of homes with a price cut in October nearly doubled, to 238 from 124 last October, according to data from Realtor.com.

That’s nothing compared to Santa Clara County, where the number of price cuts rose to 818 last month, more than six times last year’s number. Santa Clara County had been one of the nation’s hottest markets this year, and the Bay Area’s price appreciation leader until September.

“Clearly, there is a market shift,” said Rich Bennett, a Zephyr agent in San Francisco.

He just cut the price on an 1,832-square-foot Victorian condo in popular Hayes Valley by $100,000. He listed the Page Street home in mid-October at just under $1.7 million, which was realistic considering it has three bedrooms, parking and a laundry porch and is “absolutely adorable,” he said.

But the buyers didn’t come.

“In October, we saw more inventory come on the market. The economics of the Bay Area haven’t really changed,” Bennett said. But “if you don’t have people beating down your door after two to three weeks,” it’s time to consider a price change.

He has another listing right around the corner, a one-bedroom single-family home on Lily Street, that he listed two weeks ago at $1.125 million. Within a week, it had a “preemptive” offer and the sale is now pending. Single-family homes are still a hot commodity in San Francisco.

Another condo just down Page Street from his listing also had a $100,000 price cut. It sold in February for about $1.4 million and went on the market again at $1.395 million in early October. Now it’s listed at $1.295 million, below its last sales price. “That is a good indication of how the market has shifted,” Bennett said.

C.A.R. October Home and Price Report

CAR 2019 Forecast – Selected Slides

2019 Predictions: Worsening Affordability, Commutes, Natural Disaster Losses

By Aaron Terrazas, Zillow, on Nov. 28, 2018

Rising mortgage rates will set the scene for the housing market in 2019. They will affect everyone, driving up costs for home buyers and creating more demand for rentals. Even current homeowners could start to feel locked into their mortgage rates.

Here’s a snapshot of what’s in our crystal ball:

Mortgage affordability takes a hit

Despite steady climbing for the past two years, mortgage rates remain lower than they were during most of the recession and below average for the type of strong economic growth we’ve been experiencing. That will change in 2019, as the 30-year, fixed rate mortgage reaches 5.8 percent – territory not seen since the dark days of 2008, when rates were racing downward in response to the housing crisis. In 2019, rising rates will compound the effect of still-climbing home values, making homeownership even less affordable. Already, rising mortgage payments eclipse home-value gains, a phenomenon that can both encourage homeowners to stay put – to hold onto low mortgage rates that are disappearing in the rear-view mirror – and discourage would-be first-time home buyers.

Rents reverse course

Although rising mortgage rates will affect home buyers first, renters will not be far behind. As higher rates limit the number of homes that potential buyers can afford, some would-be buyers will be too financially stretched to buy and will continue renting. As a result, recent (and very slight) drops in rentwill reverse and turn positive again. The shift will be muted, however, by continued steady investment in apartment construction, which will prevent rent growth from shooting too far above income growth. In the third quarter 2018, the U.S. median rent cost 28.2 percent of the U.S. median income – considerably higher than the 25.8 percent renters paid historically.

Commutes get worse

Job creation has been concentrated in urban cores, and so has the affordability crisis – a phenomenon that’s increasingly pushed people to nest and grow their families in the suburbs. The disconnect between urban jobs and suburban residents will continue in 2019 and contribute to longer, more crowded commutes. This may be especially daunting for people in markets where living within their means already requires lengthy travel times: A home in central Boston, for example, is valued 303 percent more per square foot than a typical outlying home, while the premium for homes in central Washington, D.C., compared to outlying areas is 218 percent per square foot. Politicians in Washington, D.C. and state capitals around the country are talking up new infrastructure investments, but some may be too little too late given rising construction costs and planning delays.

Amazon HQ2 ‘losers’ see a boost

Spurred by the possibility of attracting tens of thousands of jobs from online retail giant Amazon, some areas that lost their headquarters bids to suburban New York and Washington, D.C., nevertheless got in touch with their inner can-do – and that will pay off.

Shortly before Amazon made its big announcement, Chicago debuted its “P33” initiative, aimed at becoming a tech hot spot by the city’s bicentennial in 2033. It’s been dubbed the “Burnham plan for Chicago’s tech future,” a reference to Daniel Burnham, whose 1900 attempt to create “Paris on the Prairie” both beautified the city and made it a force in urban planning.

Former Amazon HQ2 contender Atlanta already has seen some action since it was passed over by the Prime vendor: Convoy, a much smaller Seattle-based company, is opening its East Coast office there. Norfolk Southern may relocate its headquarters there from the city for which it is named, Norfolk, Va.

While New York and D.C. weigh what Amazon’s arrival means for them, could even Tucson could find a taker for its 21-foot saguaro cactus?

Natural disasters claim a record number of homes

This prediction for 2019 is a logical extension of what’s already been happening: About 15,000 homes were destroyed by wildfires in California alone in 2018 – including at least one entire town in what used to be the “off” season – and many others by storms along the gulf coast.

As the frequency and magnitude of natural disasters continues to escalate, builders and developers will focus on preventative and/or protected building materials and designs. While in the past, builders have returned quickly in the aftermath of natural disasters – typically building nicer and more expensive homes than before – that may not be the case going forward. Building costs are on the rise, and insurers are increasingly reluctant to offer policies in danger zones (or are charging higher premiums to do so) – both of which could translate into slower and costlier rebuilding.

Flood losses are growing as well, and projections for homes inundated by rising sea levels and storm surges over the course of a typical 30-year mortgage begun in 2020 are not encouraging.

Home value growth slows

One mitigating effect to rising mortgage rates will be slower home value growth. In October, home values were up 7.7 percent from a year earlier, to a U.S. median of $221,500. Zillow forecasts growth of 6.4 percent from October 2018 to October 2019; a Zillow survey of housing experts and economists anticipates a 3.79 percent increase for calendar 2019. Both forecasts indicate cooling from red-hot growth of 8 percent in March of this year.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net


Posted on December 7, 2018 at 7:07 pm
Glen Bell | Posted in Uncategorized |

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