Pacific Union Quarterly Real Estate Report: Q3 2012 | Kyle Frazier, CRS, CLHMS (Marin County, CA)
By now you’ve heard the optimistic news emanating from the media and real estate experts across the country: Housing markets are back on their way up.
Home values are rising, foreclosures are dropping, and housing starts are increasing. In addition, the Federal Reserve’s plan to purchase mortgage-backed securities to the tune of $40 billion a month should contribute to the climb by pushing down mortgage rates and boosting home prices.
Sounds like great news, and it is. But to those of us in the Bay Area, it’s a bit of old news. In January, we predicted we’d see the best year in housing since 2006. So far we have – and there are strong indicators that’ll continue, thanks to sustained job growth, low interest rates, and aggressive buyer demand.
If there’s a downside to all this, it’s that buyers who have been waiting on the sidelines hoping to pounce on a foreclosure or distressed property have likely missed their opportunity. The records being set for number of homes sold in the Bay Area are being accomplished with limited inventory, and this will contribute to price appreciation.
The combination of buyer demand and a continuing constrained supply of available homes is leading to a return of one of the hallmarks of the heyday of Bay Area real estate: the bidding war.
Multiple offers on well-priced properties are becoming the norm in many areas, and for every one buyer who lands the home, there are several frustrated suitors even more determined to find a new abode … thus fueling more multiple offers. We predict housing will be 3 to 6 percent more expensive by this time next year.
Our third-quarter report is packed with regional summaries and data that confirms our optimism. It also includes an exclusive feature story on bidding wars that was posted separately on this site last week.
Another feature of the Q3 report is a massive chart that tracks 10 years of home sales throughout the Bay Area and in Tahoe/Truckee — 66 cities, towns and neighborhoods in eight regions. A smaller chart showing regional totals appears below; click on it to see the full data set, which includes selected cities within each region.
Below are some specifics on what’s happening in our regional real estate markets. For full details, please take a look at our complete third-quarter report.
Homes sold briskly across all price points in the third quarter in Marin County, despite the constrained inventory levels that currently bedevil all real estate markets in the Bay Area.
Open houses were well-attended throughout the quarter, attesting to the pent-up demand among buyers, and Mill Valley remains especially popular. Most sales in the county involved multiple offers.
Home prices are creeping higher but still nowhere near where they were in 2006 and 2007, and it may take several years before those who bought homes at the peak of the market will see significant price appreciation. A big part of the local real estate market typically involves trade-up buyers, but that’s been difficult lately for homeowners unable to sell at the prices they expected.
Looking Forward: Home stagers tell us that they’re busier than they’ve ever been. That’s a welcome sign that the severe shortage of housing inventory may lessen in the very near future, but other indicators suggest that sellers might be waiting until the spring to gauge the increase in home values before they join the market in substantial numbers. Recent action by the Federal Reserve to push down long-term interest rates should further encourage buyers through the next year.
The summer months typically see a slowdown in home sales, but this summer was anything but slow in San Francisco. An exceptionally tight supply of homes on the market resulted in frenzied activity among buyers looking to get into contracts at all price points in the third quarter, and multiple bids were the norm for all fairly priced properties – both single-family homes and condominiums.
Sellers found themselves choosing among multiple offers – in some cases 20 or more – which helped push single-family home prices higher across the city. Prices are now very close to the highs reached at the peak of the market in 2005-2006.
The limited homes-for-sale availability, coupled with strong buyer demand, should contribute to an increase in the median price for single-family homes. We expect this will encourage more sellers to come off the sidelines, which will help inventory levels rise.
Noe Valley, with its family-friendly ambience and the easy commute to the South Bay, was one of the hottest real estate markets in the third quarter. Overall sales volume in the neighborhood was sharply up compared with Q3 in 2011 – a trend that was also seen in the rest of the city’s District 5, which includes Cole Valley,Duboce Triangle, Haight-Ashbury, Mission Valley, and Twin Peaks.
In the condominium market, limited inventory woes continued through Q3, with the months’ supply of inventory tightening up. Even though inventory was down 40 percent, sales were up 38 percent, year over year – a tremendous increase.
As young professionals move into the city with cash in hand from recent tech IPOs and expansions, South Beach will certainly solidify its status as one of the most desirable neighborhoods for condos, especially along the waterfront.
Looking Forward: The constrained inventory that has played havoc with buyers over the past year is finally showing signs of loosening. Our real estate professionals are hearing of a sharp increase in business for stagers, who typically prepare properties for sale, and for professionals who do pre-sale inspections, so expect to see a wider selection of homes for sale over the next six months.