Thursday, March 2, 2023

Bay Area Real Estate Index Shows Downward Trend

 

                                    


The S&P CoreLogic Case-Shiller Index for single-family home values within the San Francisco Metropolitan Area – which includes the East Bay, North Bay and Peninsula – ticked down another 1.8 percent this past December and is now 4.2 percent lower than at the end of 2021, representing the largest year-over-year drop for the index over a decade.  In fact, the “San Francisco” index has actually dropped over 16 percent since last May and the decline is accelerating, none of which should catch any plugged-in readers, other than the most obstinate, by surprise.

                                



At a more granular level, the index for the least expensive third of the Bay Area market ticked down 1.8 percent in December for a year-over-year decline of 4.7 percent; the index for the middle tier of the market ticked down 1.4 percent for a year-over-year drop of 3.9 percent; and the index for the top third of the market ticked down 2.0 percent for a year-over-year drop of 3.6 percent, as we projected.



The index for Bay Area condo values, which remains a leading indicator for the market as a whole, ticked down another 1.7 percent in December and was 4.6 percent lower than at the same time last year, having dropped 11 percent over the past seven months, versus year-over-year gains of 5.0 percent, 4.4 percent and 4.8 percent in Los Angeles, Chicago and New York, respectively.



At the same time, the national home price index only slipped 0.8 percent in December and remains “5.8 percent higher than at the same time last year,” with Miami, which remains 15.9 percent higher than at the same time last year, continuing to lead the way with respect to exuberantly indexed home price gains, followed by Tampa (up 13.9 percent) and Atlanta (up 10.4 percent), and the indexes for San Francisco and Seattle (down 1.8 percent) the only two major metropolitan areas having recorded year-over-year declines, but with an understated “cooling” across the board.

Sunday, February 26, 2023

Bay Area Median Rent Price Shows Slight Decrease


San Francisco and the rest of the Bay Area saw apartment rents fall in January at a higher rate than the national average, another sign of a slowing Bay Area economy that could be hurt further by mass tech layoffs.

San Francisco median rents fell 1.1% to $2,174 per month compared to December, one of the biggest drops in the country. Metro area rents are down 5% compared to March 2020 when the pandemic started, making San Francisco and San Jose the only two metro areas with more than 1 million people that have rents that are below pre-pandemic levels.

National rents fell for the fifth straight month, with prices down 0.3% compared to December. Prices are still up 3.3% compared to January 2022, but growth has slowed in the past two years. Two-thirds of the 100 largest U.S. cities saw rents drop month over month.



A wave of layoffs in tech is expected to reduce demand for apartments in the Bay Area. “Softness in the tech industry is likely to prevent a strong rebound in Bay Area rents,” Apartment List said.

Nationally, rents are expected to climb again during the busier spring and summer months.

Bay Area home values have also declined in the last 6 months as mortgage rates have shot up, according to Zillow.

Tuesday, July 12, 2022

Bay Area Home Prices Becoming More "Normal"


After two years of soaring home prices, the Bay Area housing market may have entered a cooling phase as rising mortgage rates put a squeeze on buyers.

But that doesn’t mean home values are suddenly falling back to Earth. Far from it. The median price of existing single-family houses in the region hit a record $1.36 million in May, a 13% increase from the same month last year, according to the latest data from real estate analytics firm CoreLogic.

Even so, housing experts say the breakneck pace of year-over-year price growth appears to have peaked – though few are predicting a housing crash on the horizon.

“We’re just seeing more of a normalizing to pre-pandemic conditions,” said Selma Hepp, CoreLogic deputy chief economist. “It wasn’t sustainable.”

CoreLogic forecasts annual home price growth in the Bay Area will decline to single digits by next summer. In other words, prices are still expected to go up across the region compared to the year prior, just not as quickly as before.


Hepp pointed to rising mortgage rates as a key factor. The cost of a 30-year fixed-rate jumbo home loan has in recent months jumped to around 5.7%, according to personal finance site Bankrate.com. For most of the Bay Area, a mortgage is considered jumbo if it’s more than $970,800. Though the 30-year rate has dipped the past few weeks, it’s still about double the roughly 3% historic-low charge available for most of the pandemic.

“Now that mortgages are much higher and the cost of ownership has gone up (significantly) from only a few months ago, it has had an impact on demand,” Hepp said. “With fewer buyers out there, what we’re starting to see is more price reductions and more homes staying on the market longer.”

In San Francisco, Santa Clara and San Mateo counties, that dynamic likely contributed to home prices falling slightly for the first time this year from April to May.

All three counties still saw large year-over-year gains: San Francisco increased 9% to $1.89 million, Santa Clara grew 18% to $1.8 million, and San Mateo was up 14% to $1.99 million.

Ramesh Rao, a real estate agent with Coldwell Banker Realty in the South Bay, said over the past few months he’s seen homes regularly going for under the asking price. That was unthinkable over much of the past two years as house hunters, many untethered from the office by remote work and seeking more living space, made all-cash offers and bid hundreds of thousands of dollars over asking in a mad scramble driving up home prices.

As the Federal Reserve is expected to continue raising borrowing costs to combat inflation, Rao said competition could soften even more.

“My advice to all clients if they’re sellers is: Today is better than tomorrow,” he said.

Friday, July 8, 2022

Hot Bay Area Housing Market Begins to Cool


Five of the 10 U.S. housing markets that have cooled fastest this year are in northern California–San Jose, Oakland, San Francisco, Sacramento and Stockton–and three of those five are in the Bay Area. All 10 of the housing markets cooling fastest are in the American West. The cooldown is largely because mortgage rates nearly doubled in the first half of the year, reaching nearly 6% in June. That caused the monthly mortgage payment for a typical homebuyer to surge 45% year over year to $2,459 in June and priced many buyers out of the market.

The cooldown comes after the housing market soared to new heights during the pandemic, largely fueled by record-low mortgage rates and remote work.

“The housing market has changed drastically in the last month because higher rates make homes even more expensive than they used to be. At the same time, fewer people can afford pricey homes because of the volatile stock market,” said San Francisco Redfin agent Joanna Rose. “In the early spring, every home was selling over its asking price with multiple bids. Then the number of people attending open houses dropped from 20 to two, and now some homes are sitting on the market for over a month and selling for under asking price. Supply is starting to pile up.”

Northern California’s housing market is cooling faster than anywhere else in the country

San Jose is cooling at the fastest clip, with measures of homebuyer demand and competition dropping off quicker than any other major metro this year. The supply of homes for sale in San Jose was up 10% year over year in May–but just three months earlier in February, supply was down 43%, indicating that buyers are now gobbling up fewer homes. And the share of homes that went off the market in two weeks was down 5% year over year in May, a big swing from the 22% year-over-year increase in February–that’s an indicator that homes are selling slower.

After San Jose, Sacramento is cooling fastest, followed by Oakland. Stockton, CA, located about 50 miles south of Sacramento, comes in at number five, and San Francisco is number 10.

The Bay Area is cooling quickly due to high mortgage rates, which hit pocketbooks harder in pricey areas, and the slumping stock market, a factor that’s particularly impactful in tech hubs where a lot of residents are compensated with equity. Sky-high home prices are another factor pricing many would-be buyers out of the market. San Jose, Oakland and San Francisco are the most expensive metros in the U.S., with the typical home selling for over $1 million and many selling for well over $1.5 million.

In dollar terms, mortgage rates reaching nearly 6% in the spring had a particularly big impact in pricey areas like Northern California. The typical monthly mortgage payment on a million-dollar home is roughly $5,750 with a 6% interest rate, $1,400 higher than it would be with a 3% interest rate (assuming a 20% down payment). The increase is half as big with a home priced close to the national median: The typical monthly payment on a $450,000 home is about $2,600 with a 6% rate, about $700 higher than with a 3% rate.

“But there is good news for some buyers. People who can afford to buy right now could get something for $100,000 or $200,000 less than a few months ago, largely because homes are often no longer selling above asking price,” Rose continued. “They’ll have a higher monthly payment for now due to the rise in mortgage rates but can refinance later if rates come down.

Monday, June 20, 2022

Nationwide Home Prices Begin to Cool


Home sellers are slashing prices as the housing sector cools, according to a research from a real-estate data firm.

More than 25% of homes on the market right now have cut their price, Altos Research found, which is in stark contrast to how prices have been climbing over the last two years. 

“Rising rates and the shift in the economy has slowed down the super-eager buyers,” Mike Simonsen, co-founder and CEO of Altos Research, a real estate analytics firm, told MarketWatch. “And what we’re feeling is the speed of the shift.”

Put bluntly: “We’re shifting from a real buying frenzy to much more normal conditions,” he added.

Adding to the cooling off: On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 0.75 percentage point, the biggest increase since 1994 as it tries to tame rising inflation from a 40-year high.

The U.S. housing market boom amid the pandemic was felt across the country. In a high-demand area like San Jose, California, the typical home was valued at $1.5 million, as of May 31, according to Zillow. That’s up 23.7% from the previous year. In May 2020, the typical home in the Bay Area was valued at $1.09 million.

Under normal conditions, about a third of homes listed on the market for sale take a price cut before they’re sold, Simonsen explained, and when the market is hot, that drops down to 25%. This spring, however, only 14% of homes on the market took a price cut. And that’s a reflection of high demand and low inventory.

“Sellers in the last two years can overprice their home and still get offers — that condition of the frenzy is gone, so it’s a much more normal market,” Simonsen said.

With buyers slowly backing off, that percentage is now climbing, a trend also supported by research from Redfin, a real-estate brokerage. Some 21% of sellers dropped their list price during the four weeks ending June 5, which was the second-highest share on record, going back to 2015, Redin said.

Sellers will need to lower their asking price by summer’s end. “By July, expect to be back to our normal conditions nationally,” Simonsen added. “We’ve been hotter than normal for over two full years since the start of the pandemic. By August, sellers who aren’t prepared will be surprised.”

Good news for first-time home buyers

The median sales price of a house sold in the U.S. was still at a record high of $428,700 in the first quarter of 2022, up from $313,000 in the first quarter of 2019 before the COVID-19 pandemic, according to data from the St. Louis Fed. Simonsen said the magnitude of price cuts could vary, from $5,000 upwards, depending on the value of the house.

For first-time house buyers, who have seen prices gradually rise out of their reach over the last two years, there could be some relief. “If people want to buy a home, they would get outbid by maybe somebody with all-cash, or an investor,” Simonsen said. “But now, selection is increasing, competition is decreasing, and they finally have some opportunities to buy.” 

But don’t expect prices to hit rock-bottom just yet. “There is nothing in the data yet that shows an indication of home prices crashing,” Simonsen said. But “there is an indication of probably zero home price appreciation in 2023.”


Friday, January 29, 2021

Charts Show Just How Dramatic Bay Area Rents Declined in 2020




San Francisco’s housing rental market saw the most dramatic changes among all U.S. cities last year during the coronavirus pandemic, new data shows.

When the pandemic began in March, moving virtually halted across the country. But as job losses rose and workplaces went remote, people started leaving pricey big metro areas in favor of more affordable cities.

San Jose landed sixth on the list with a 15.2% drop since March and a median two-bedroom rent of $2,035, and Oakland was eighth on the list, declining 14.2% since March and a median two-bedroom price of $1,952. Apartment List estimates the median contract rent across new leases signed in a given market and month.

Rents in principal cities across the U.S., which are usually the largest or have the greatest economic output in the area, fell 9.3% since January, while rents in surrounding suburban cities increased 0.5% since the start of last year. The report reflected a big exception in the Bay Area: Both principal city San Francisco and its neighbor Oakland saw dramatic declines, though Oakland’s was somewhat smaller.



The pandemic also caused vacancies to rise in many large, pricey coastal cities. San Francisco saw a big spike in available apartments, which in turn pushed rental prices down. Apartment List’s local vacancy index more than doubled from 5% before the pandemic to nearly 12% by August.

“In turn, landlords had to drop their prices to attract the renters that were still interested in moving,” said Apartment List research associate Rob Warnock. “This phenomenon took place in many expensive cities throughout the country, but none more dramatic than San Francisco.”

Other cities including San Jose, Seattle, New York and Boston, had similar patterns. But some more affordable cities saw vacancies decline and rents trend upward, including Fresno; Albuquerque; Boise, Idaho; and Gilbert, Ariz.

Seasonal declines are normal this time of year, but Apartment List found the drop nationally in 2020 was slightly steeper than usual. The national rent index declined 0.4% from November to December, compared to 0.2% to 0.3% from the past three years.

“Rent declines in November and December are not unusual,” Warnock said. “Moving requires a lot of time and money, so during the winter months typically people direct those resources to holidays instead of moving. That said, in San Francisco, this season’s rent drops are steeper than previous years since the market was already in free fall going into this slower season.”

In 2019, rents in San Francisco decreased 0.9% in November and December. In 2020, they dropped 3.8% in November and 2.7% in December.

Monday, June 15, 2020

Median Home Prices Climbed in Bay Area Despite Corona Virus Restrictions


Eager buyers and reluctant sellers pushed Bay Area homes prices higher again in April, fueling quick sales and a robust market despite coronavirus restrictions.
Median sale prices climbed in seven core Silicon Valley and East Bay counties, according to a Zillow analysis. Prices jumped 7 percent in Alameda County and 6 percent in Santa Clara County from the previous April. The median sale price in April for a single-family home in the Bay Area was $896,000.

Fewer homes went up for sale as sellers pulled back from having strangers tour their houses, but buyers snapped them up at a pace rivaling the height of the housing boom in 2017 and 2018.
“The really big picture story is that prices, especially for single-family homes, have really held up during the crisis,” said Zillow economist Jeff Tucker. The relatively strong, tech-driven Bay Area economy, tight home inventory and historically low interest rates contributed to rising prices during the first full month of pandemic restrictions, he said.
The median price for a single-family home sold in April rose to $1.27 million in Santa Clara County and $940,000 in Alameda County. Other Bay Area counties saw smaller gains: Prices rose 3.1 percent to $1.49 million in San Mateo, 2.2 percent to $666,300 in Contra Costa, and 3.6 percent to $1.59 million in San Francisco. Data for Marin and Napa counties was not available for April, according to Zillow.
But buyers and sellers have remained cautious amid health risks. The volume of single-family home sales in Bay Area counties plummeted 21.4 percent in Santa Clara, 27.6 percent in Alameda, 10.7 percent in Contra Costa, and 22.9 percent in San Mateo from the previous year, according to Zillow. Single-family home sales in San Francisco were nearly cut in half.
The U.S. home market has been supported through the crisis by record-low interest rates. The rate for a standard, 30-year-fixed mortgage fell to 3.13 percent last month, according to Freddie Mac. The median price of a single-family home sold in the U.S. in April rose 4.3 percent from last year, according to Zillow.
Bay Area real estate agents say they’re surprised the market has sustained high prices through the lockdown. Local counties and the state have restricted home showings and real estate transactions since mid-March. Agents have gradually been allowed to show homes; at first, only vacant units but now buyers can tour occupied homes as long as residents are not present. Only two visitors may enter a home for sale with an agent at one time. Social distancing, masks and appropriate cleaning procedures are required. Open houses are still banned.
Many agents have turned to digital solutions, adding virtual 3-D tours to online listings and conducting video conferences with prospective buyers and sellers.
In some cities, the few homes that reached the market sold in just days, similar to the white hot trading of three years ago. Many cities in Contra Costa and Alameda counties saw houses sell weeks faster than in spring the previous year, according to data from Bay East Association of Realtors. Homes in Union City and Moraga spent an average of just 7 days on the market and 9 days in San Leandro. Houses in Hayward last April typically took 36 days to sell; this year, sales took just 11 days.
“It’s remarkable how much demand there is,” said David Stark of the Bay East Association of Realtors said. “People still want to buy houses.”
Los Gatos agent Mary Kay Groth said sellers have been weighing the risks of putting their homes on the market. Some agents have been vetting buyers to ensure only qualified and serious buyers make in-house visits, she said. In some cases, she said, “the process has been somewhat laborious.”