Just when it seemed Bay Area home prices couldn’t jump any higher, they soared to dizzying new heights in November — and in the process, set a new record.
The median price for a single-family home in the Bay Area last month was $825,000, up nearly 15 percent from the same time last year, according to new data from property analytics company CoreLogic.
That’s the most expensive since CoreLogic started keeping track in 1988, surpassing the last record of $823,000 set in June. (That data excludes sales of new homes, which make up a small fraction of the region’s housing inventory).
“For the clients that I’m working with that are buyers, it is stressful,” said Sunnyvale-based real estate agent Kevin Swartz. “It is sometimes, I would say, disheartening.”
Meanwhile, the number of available home keeps shrinking, intensifying competition and contributing to the vertigo-inducing prices. Homeowners in the Bay Area’s nine counties sold just 5,123 single-family houses in November, down 2 percent from the same time last year, according to CoreLogic.
Santa Clara County saw the most dramatic price increase last month, with the median price for an existing single-family home jumping nearly 26 percent year-over-year to $1.18 million — a record for the county.
Even areas where homes remain comparatively affordable saw major spikes. In Solano County, the median price of a single-family home increased 14.5 percent, to $402,000. In Contra Costa County, the median price spiked nearly 10 percent to $564,500. Alameda County also saw a major jump as the median price there reached $825,000, up nearly 11 percent from last year.
The relentless rise in prices is about more than just price appreciation. It also reflects a shaking up of the market, according to CoreLogic research analyst Andrew LePage. A greater share of Bay Area sales are happening in high-end neighborhoods, which is skewing the calculation of the region’s median prices.
“There just isn’t enough inventory in the lower price ranges,” he said.
In Santa Clara County, almost 77 percent of sales of existing single-family homes closed at $800,000 or more, up from 65 percent the year before, LePage said. At the other end of the spectrum, just 9 percent sold for less than $500,000.
Homes that cheap are a relic of the past, at least in Silicon Valley, Swartz said.
“There is nothing like that anymore,” he said.
Over the past month, Swartz also has noticed homes getting appraised for less — and in some cases, much less — than the price they sold for. That development is disturbing for buyers’ peace of mind, but it also can have a more troubling effect of pushing a property out of reach for a first-time home buyer. If a property appraises for much less than its contract price, a bank often won’t lend enough to make up the difference, leaving the potential buyer without the means to afford the down payment.
“It’s going to probably mean that those fringe buyers who can just barely qualify are going to have to take a step back from the market until it slows down again,” Swartz said.
It’s not clear when that might happen. For now, the years-long upward trajectory shows little indication of slowing.
The median price of new and existing Bay Area houses and condos has increased an average of 11.6 percent year over year for the past six months, according to CoreLogic.
November marks the 68th straight month of year-over-year price increases. But that stretch isn’t unprecedented: The Bay Area saw a 69-month streak in the late 90s that stretched into 2001.
Whether buyers see relief next year will depend on how much housing supply the Bay Area generates, LePage said. Just 723 new homes were sold in the region last month, compared to 5,123 older homes, which make up the bulk of the market. And the number of new homes sold dropped more than 14 percent from last year. In San Francisco, just 13 new homes sold last month, compared to 128 in November of last year.
“There just aren’t a lot of signs,” LePage said, “that it’s going to loosen much.”
California exodus:Buyers in high-tax states such as California willmove elsewhereif federal tax reform takes away deductions for state and local taxes — one of the more controversial aspects of the proposals pending in Congress. Redfin surveyed 900 homebuyers about this question last month; 37 percent of those from California said they would consider leaving the state as a result, compared to 33 percent nationally.
Waiting to sell:Proposed federal tax code changes relating to tax breaks and how long sellers must live in their homes to qualify — if passed — will make some people wait for another few years to list their homes, making the inventory shortage worse.
Urban suburbs: “Wealthier millennials” will drive the development of a new, denser kind of suburb with modest-sized homes built close to transit, complete with walkable neighborhoods, some urban amenities and good schools. But they won’t necessarily be affordable. Mountain View, where the median price for 2-bedroom home isover $1 million, was Redfin’s Bay Area example of an urban suburb. Regardless, Richardson says, far-flung, sprawling homes known to those who don’t live in them as “McMansions” are simply not what this generation wants.
Sellers market:Homes will sell even faster than they did this year, when nearly one in five sold within a week.
Mortgage rateswill climb from below 4 percent to 4.3 percent or higher for a standard, 30-year loan. And because of high demand, home prices are expected to keep climbing, pushing the monthly payments 15 to 20 percent higher.
Housing bubble?Even in impossibly hot markets like the Bay Area, analysts aren’t seeing a bubble. They drew that conclusion partly because people are making larger down payments or paying all cash, and partly because sellers are getting their asking price — and then some. Richardson found that in cities such as Oakland, the average buyer has less debt relative to the value of their home — 80 percent — than they did in 2006, before that infamous bubble burst.
Roommates:More people will be doubling or tripling up to afford these skyrocketing rents and prices — a la the 1990s TV show “Friends,” Redfin predicts. Finding a compatible roommate of any age will get easier with real-estate startups like Nesterly, which matches younger renters with baby boomers, and CoBuy, which helps people go in on a house together. “We love the innovation,” Richardson quips in her report, “not to mention the new sitcom possibilities.”
Reflecting the chronically tight supply of available homes, Bay Area housing sales fell in October from a year earlier as prices marched up across the nine counties by nearly 11 percent. The region’s median sale price of a single-family home was $800,000 and surpassed $1 million in four of its counties.
In Santa Clara County, where the housing supply is about half of what it was a year ago, the median price reached a new peak: $1,125,000 for a single-family home, up a whopping 19.7 percent from October 2016. Even in Contra Costa County, overall one of the region’s more affordable areas, the median jumped 16.2 percent to $580,000.
“It’s a sign of the times and a sign of the housing affordability problem the Bay Area continues to wrestle with,” said Andrew LePage, research analyst for the CoreLogic real estate information service, which on Wednesday released its latest study of market conditions. They are “brutal for a first-time buyer.”
Between May and October, the region posted an average year-over-year jump in its median sale price of 11.7 percent — up from 5 percent for the same six-month period in 2016. Double-digit gains are again the norm, as they were when the region was rebounding from the Great Recession.
It’s Economics 101: When there are few houses and plenty of potential buyers, prices go up.
“Buyers are lining up like the Apple store,” said Tim Ambrose, president-elect of the Bay East Association of Realtors. “They’re carefully watching what’s coming to the market because they want to get their offers in as soon as they can.”
Describing price trends, he offered this analogy: “It’s like what happens after a hurricane. The price of bottled water goes through the roof. That’s the market we’re in.”
Hilary Yeung understands that market.
She is an accountant. Her husband, Johnny Feng, is a materials manager in tech. With their two young children, they live with Feng’s parents in Santa Clara and have been looking off and on for a house of their own since 2014.
“But every time we started looking at the market, it was up five percent, and the next time 10 percent,” said Yeung. “We were getting pretty frustrated.”
They were typical Silicon Valley buyers, said Mark Wong, their Saratoga-based agent with Alain Pinel: “People are so anxious to get a house. They know that if they wait, they’re out-bidded.”
This fall, Yeung and Feng got serious about their search, determining they had been priced out of the South Bay communities to which they aspired. They moved their hunt to Fremont, found a two-story townhouse that listed for $650,000 — and quickly put in their bid for significantly more than the list price.
Theirs was one of 16 offers and Yeung was “pretty nervous. Because we really liked this house. It’s move-in ready and has a nice backyard for the kids to play. It’s small — 1,200 square feet — but it’s like a start-up home for us. We really wanted it. But what if we didn’t get it? Prices would keep going up, right?”
They got it.
Throughout the Bay Area, only 5,374 single-family homes sold in October, making it the slowest October in four years. Some of that slowdown is attributable to the devastating wild fires in Sonoma and Napa counties, CoreLogic noted, but regionwide it’s the recurring cycle of low inventory and high prices that largely accounts for the sluggish sales activity.
“I’ve got folks who’ve been shopping for something in the $1 million or $1.2 million range in Walnut Creek or Pleasant Hill and there’s nothing for them,” said Keller Williams agent Matt Rubenstein, who is based in Danville. “There’s just really nothing to see.”
At lower price points — $500,000 to $700,000 — prospects improve, he said: “In Martinez, you can get a single-family residence that starts with a 5 or a 6. But it’s still competitive. Folks are writing respectable offers on properties, and a lot are for over asking.”
According to CoreLogic, the share of homes selling in the lower-price ranges keeps shrinking.
Homes selling for $500,000 or less accounted for 37.7 percent of October sales in Contra Costa County — down from 50.2 percent a year ago. Sales of $800,000 or more accounted for 28 percent of Contra Costa sales in October, up from 23.5 percent in October 2016.
Four or five months ago, Chad and Cassidy Gagnon — newlyweds looking for their first house — began to study the market: “You’re looking every day online, putting in the filters and searching,” Chad said. “You see something you like and save it.”
Planning to have a family — and hoping to minimize the commute for Cassidy, a pediatrician — they zeroed in on three communities with reputations for good schools: Pleasanton, Dublin and San Ramon. In November, with Ambrose as their agent, the Gagnons bid on a house that listed for $1 million in Pleasanton. They offered $1.1 million. There were eight other offers and it went for $1.2 million.
Chad, who works in security, imagined the kind of house they might have bought back in Rhode Island, where he grew up: “We’d probably be right on the ocean for that kind of money.”
Undaunted, they next set their sights on a 2,040-square-foot home in Dublin: four bedrooms and 2.5 baths in a secluded neighborhood with hiking trails out back. It listed for $990,000 and drew multiple offers including the Gagnons’ own generous bid: “After the first experience, where you’re up against eight other people, it kind of forces you to give a little extra,” Chad said. “We also wrote a letter to the seller, talking about ourselves — why we were looking to buy and how we wanted to start a family. I think we all agree that the letter was probably a determining factor.”
In other words, their offer was accepted: “We lucked out.”