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.”

Thursday, June 11, 2020

Authentic Real Estate and Zero Tolerance

At Authentic Real Estate and Property Management we embrace a zero tolerance policy for inflammatory statements that spread hate, discrimination, intolerance and falsehoods against the black community.

Thursday, April 30, 2020

First Quarter 2020 GDP/Home Sales Numbers Released and Yes...It's Bad

The U.S. economy shrank in the first quarter, and it will almost certainly get worse. A weak read on pending home sales is a bad omen for April sales data. 

The initial read on Q1 GDP confirms what many already knew: Large parts of the economy came to a crashing halt in March, the economic expansion has ended and a recession is almost certainly underway. The negative quarter – the first since a 1.1% decline in the first quarter of 2014, and largest since the Great Recession – was driven by a severe pullback in consumer spending and trade-related metrics. Consumer spending, which comprises about 2/3 of the overall economy, fell 7.6% in the three-month span ending in March, with spending on services falling 10.2%. But as bad as these numbers appear, the second quarter’s figures are poised to be far, far worse. 
Today’s release predominantly covers a period that preceded the coronavirus outbreak and includes data from just the few weeks of the economic shutdown that largely began in March. Businesses in some states weren’t forced to shut their doors until late March or even early April, and subsequent slowdowns – including a sharp reduction in spending and an unprecedented surge in layoffs — barely register in today’s report, if at all. It’s also common for initial GDP readings to be revised downward, sometimes sharply, in times of economic volatility. The initial reading of annualized GDP growth in Q4 2008 – the middle of the financial crisis – was -3.8%, a level that was later restated to -8.9%. 
Taken together, it’s likely that today’s numbers will be revised downward when they’re restated next month, and that economic growth in the current quarter will plunge to levels not seen since the Great Depression. Even so, the housing market was a surprisingly positive note in today’s GDP release. The seasonally-adjusted annual rate of residential fixed investment, which includes spending on home construction, grew 21% from last quarter. 
The monthly decline in March pending home sales — to their lowest level since 2011 — was disappointing in some ways, but not unexpected. Overall, today’s reading was in line with other housing indicators that have emerged in the last few weeks. Pending sales typically lead the official reading of existing home sales by 4-6 weeks, and most experts already expect April’s existing sales figures to decline sharply. Pending sales figures are often viewed as a forward-looking indicator of the housing market, but in today’s fast-moving, unprecedented times, today’s release in some ways already feels like old news.
But other, faster indicators tell a somewhat more optimistic housing story. One of these is the weekly read of for-purchase mortgage application activity, which showed purchase applications rebounding over the week ending April 24 after falling in early April to their lowest level in almost five years. 
And these gains may be starting to accelerate. For-purchase applications still sit 19.8% below their levels from a year ago, but they were down 35% year-over-year just two weeks ago – a strong improvement in a short period of time. According to the Mortgage Bankers Association, the nation’s ten largest states saw an increase in purchase activity this week from last, with Washington, California and New York among those that saw a double-digit percent increase over that span. 
Low rates and changing lending criteria appear to be playing a role. Rates last week hit the lowest point ever recorded by the Mortgage Bankers Association, while strict lending criteria and preferences are making for more attractive rates for those looking to purchase a home rather than refinance. All told, it is an encouraging sign for the housing market, and may suggest that a possible upturn in the market is indeed underway.

Monday, April 6, 2020

First Signs of Slowing Housing Market Due to Economic Shutdown

In the weeks ending March 21 and March 28, the number of newly-listed properties fell by 13.1% and 34% respectively when compared with the same period a year ago, found. This is an indication that home sellers may be holding off on listing their properties right now.

The pace of home-price growth also slowed notably in the latter half of the month, according to the report. Home list prices were only up 3.3% year-over-year for the week ending March 21, and 2.5% for the following week. This represented the slowest pace of listing price growth since started tracking this data in 2013
“Our inventory and listing data can provide some early insight into how housing markets may be impacted by COVID-19, but the situation and reactions to it are still rapidly evolving,” chief economist Danielle Hale wrote in the report. 

“The U.S. housing market had a good start to the year. Despite still-limited homes for sale, buyers were buying and builders were building,” she wrote. “The pandemic and virus-fighting measures appear to be disrupting that initial momentum as both buyers and sellers adopt a more cautious posture.”
Real-estate firms have taken steps to brace for the impact of the coronavirus pandemic. So-called iBuyers including Zillow (ZG) and Redfin (RDFN) that purchase homes from sellers and then sell them for a profit had wound down their home-buying operations in anticipation of an economic downturn. Real-estate brokers, including Redfin and Re/Max (RMAX) , had also shifted toward virtual home tours as open houses became verboten in the wake of social-distancing recommendations.
And other recent reports have shown additional signs of a slowdown in the housing market. LendingTree (TREE) released a report of Google (GOOG)  search data analyzing the popularity of the search term “homes for sale” across the country’s 50 largest metro areas. Searches for “homes for sale” have fallen across all 50 cities in the study from their peak levels in 2020 thus far.
Another sign that home sales will slump this spring: Mortgage applications. The volume of mortgage applications for loans used to purchase homes was down 24% compared with a year ago for the week ending March 27, according to data from the Mortgage Bankers Association. That’s in spite of mortgage rates being near historic lows. Comparatively, the volume of refinance applications was 168% higher than a year ago.
Before the coronavirus pandemic flared up, the U.S. housing market was on relatively solid footing. While the number of homes for sale remained low — constraining sales activity to an extent — demand among buyers was still quite high. Low mortgage rates had fueled an early start to the spring home-buying season, with homes selling four days faster in March when compared with 2019 levels, found.
The jump in jobless claims has stoked concerns of a repeat of the Great Recession and the foreclosure crisis that preceded it. But housing economists argue that this is unlikely to be the case.
“While housing led the recession in 2008-2009, this time it may be poised to bring us out of it,” Mark Fleming, chief economist for title insurance company First American Financial Corporation (FAF) , wrote in a report this week. Unlike in the 2000s, the housing market in the U.S. is not overbuilt, Fleming argued, making it less likely that a large swath of vacant properties will crater the home values for homeowners. Rising home values and stricter lending standards have also meant that homeowners are sitting on historically high amounts of home equity.
“The housing market will not go unscathed, as consumer confidence and a strong labor market are essential in the decision to purchase a home,” Fleming wrote. “Yet, this time, housing is a casualty of a public health crisis turned economic, not the cause of an economic crisis.”

Monday, February 3, 2020

Bay Area Rent Cost Acceleration Forecast to Slow in 2020

After years of rapid growth, Bay Area rents continue to increase but are finally showing signs of a slowdown. That said, the region remains among the priciest in the country, and renting a one-bedroom is likely to cost over $2,000 in cities where jobs are plentiful, such as San Francisco, Oakland and San Jose.
Trends in the rental market are tricky to track, because a single clearing house of price data doesn't exist as it does with home sales that are entered into county recorders' offices. But at the start of a new decade, industry experts are noting the decline in the rate of growth in 2020.
Overall rent in the greater Bay Area in 2019 increased 1.2 percent year-over-year, marking the slowest rate of growth in more than two and a half years, according to Rent Cafe. This number was also under the 3 percent bump rents saw nationally.

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, is noticing the slow growth, noting the breakdown of regional data from Yardi Matrix with a 2.6 percent year-over-year increase in San Francisco, 2.3 percent in the East Bay and 0.5 percent in San Jose.
"Several years ago, we had year-over-year growth exceeding 10 percent, so [this is] a sharp deceleration," Rosen said.
Rosen cites three main factors impacting prices. First, new supply is flooding the market, especially in Oakland and the Silicon Valley. Second, skyrocketing rents in the last decade mean the region has finally "reached a rent level that pushes against affordability ceiling for many households," he said.
Finally, a substantial increase in "out-migration," with people and jobs leaving the region, is making the market less competitive. "This is caused by high cost of housing, much higher effective tax rates, because of the new tax law limiting state and local income tax deductions, and the general deterioration of quality of life," Rosen explained.
Chris Salviati, housing economist with Apartment List, agrees that the 2019 data reveals the Bay Area market has flattened and noted that the region's allure as the best place in the country for jobs may be fading.
"Even though the economy remains hot in the Bay Area, a lot of other cities in other areas of the country have started to thrive," Salviati said. "There are burgeoning tech scenes in other cities. If you wanted that high-salary tech job, the Bay Area was once the only place to come. Now, other places can offer similar opportunities at a lower cost of living. It has become less attractive. That inbound demand is cooling."
But while the nine-county region and surrounding counties may finally be leveling off, there are still some areas where rents are seeing significant growth.
"When you look at the aggregated numbers, they all say there’s been a slight pull-down," said Doug Ressler, a business intelligence manager with Yardi Matrix. "What’s really happening is the suburban areas are pulling down the numbers. The central core is going like gangbusters."
The average San Francisco rent at the close of 2019 came in at $3,688, which was 2.1 percent higher than the same time last year. Oakland, with a median rent of $2,908, saw a 5.4 percent jump. Meanwhile, outside the core urban area, Richmond ($2,151) and Petaluma ($2,292) showed the most significant rent drops in the Bay Area — 7.8 and 2.7 percent year-over-year, respectively, according to Yard Matrix.
Despite the leveling off, Ressler said he expects the market to remain "very robust," especially in Bay Area cities.
"The Bay Area is landlocked," he said. "That core is a magnet for a workforce and a magnet for upper-median income. The supply has been limited, which has been allowing the rents to go up."