California Real Estate Shows 4 Months Consecutive Cooling

 

The technology-powered real estate brokerage, Redfin has issued its Fastest Markets Report for August which shows home-selling speeds fell for the fourth month in a row.

In August, 27.9 percent of homes went under contract in less than two weeks, down from 29 percent in July and 33.7 percent in April.

As Redfin's latest Bidding War Report shows, the competitive landscape in the housing market has changed drastically since spring, due to elevated home prices and mortgage rates. This has led many buyers to slow or pause their buying plans over the past four months.

Overall Fastest/Slowest

* San Jose remains the fastest-moving market in August, with 43.6% of listings under contract within two weeks despite slowing slightly from 46.1% in July. Across 23 markets, San Jose has been the fastest every single month since December 2011. * The slowest-moving market was again Philadelphia, which saw 7.0% of homes under contract within two weeks, down from 7.3% in July.

Notable Speed Changes

* San Diego slowed the most from July to August. In San Diego, the rate of homes going under contract within two weeks slowed from 36.1% to 31.6%. Las Vegas sped up the most from July to August. In Las Vegas, 24.7% of homes went under contract within two weeks in August compared with 18.3% in July. * Compared to a year earlier, Atlanta sped up the most. The rate of homes going under contract in 14 days moved from 1.2% to 22.7% between August 2012 and August 2013. * Sacramento slowed the most in the year, dropping from 40% to 34.1%.

Despite the slowing trend throughout summer, market speed could see a slight increase in September as some buyers react to reduced mortgage rates. After surpassing 4.7 percent in mid-August, 30-year fixed mortgage rates eased to about 4.3 percent in September in reaction to the Federal Reserve's decision on September 18 to keep its stimulus program unchanged for now.

Although the rates have dropped only slightly, Redfin agents in Seattle, Washington, D.C. and Los Angeles in recent days have reported a boost in urgency among buyers to find a home.

"I have clients who were planning to move next year. They are now considering selling their condo this autumn because, with lower rates, they believe their money will go further on their next home," said Washington, D.C. Redfin Agent Lisa Greaves.

Bay Area Home Sales Cool Off

The sizzling Bay Area housing market cooled in August following one of the most dramatic run-ups in recent years, according to a report released Friday.

After months of increases, single-family home sales dropped 3.2 percent from a year ago, and were down 8.8 percent from July, according to real estate information service DataQuick. While the median single-family price of $588,000 extended several months of double-digit annual gains, it was 3.9 percent lower than it was in July, the first such drop in six months, DataQuick reported.

The market is stabilizing, said Arvin Paredes of Keller Williams in Campbell. "The competitive market made it super-exhausting for people," he said. "They're exhausted from looking for places, school's back in, and the market tends to slow down seasonally in the fall."

 Jim Kabel, a remodeling contractor in San Jose, might be a poster child for the new market conditions. He started looking for a home several months ago but lost out several times to higher bidders. Recently, though, he snagged a townhouse in San Jose.

 "Earlier in the season it was much busier with multiple offers, and people were bidding higher than what I was offering," Kabel said. "Now it's calmed down quite a bit. Places are staying on the market longer, prices are dropping and there's much less competition."

 That means shopping for a home is likely to be less of a challenge in the coming months, said DataQuick's Andrew LePage.

 "Compared to the last four to five months, the evidence is that it will be a pleasurable experience for home shoppers," he said. "There is more to choose from and prices aren't leaping any more."

 That's what Louis and Keelin Marcoux found after months of getting beaten out by higher bidders for homes in Pleasanton. Louis Marcoux, an executive with a Pleasanton medical electronics firm, said they lost out on three houses, only to win the fourth time around in August.

 "It was a blessing in disguise" to be beaten out on the other homes, he said. "It is a better house, a better location, and everything we were looking for. Prices started to cool down just a tiny bit by the time we came to it. It's definitely a little less competitive."

 The months-long trend of strong annual price gains is expected to taper in the fall with fewer buyers, a greater selection of homes to buy and rising mortgage rates.

 "There's not quite the frenzy there was before," said Lanny Baker, chief executive of Zip Realty. "Higher prices and higher interest rates are causing that."

 In Alameda County, the median price for existing single-family homes was $570,000, up 32.6 percent annually but unchanged from July; in Contra Costa County, $435,000, up 39.4 percent annually but down 3.3 percent from July; in Santa Clara County, $744,500, up 24.1 percent from last year but nearly unchanged from July, and in San Mateo County, $867,500, up 33.5 percent from last year and up 4.1 from July.

 Real estate agents report increasing supplies of homes for sale in some -- but not all -- parts of the Bay Area, giving buyers more choices and more time to make a decision to buy. There are still multiple offers and all-cash sales, but the number has dropped.

 The new market conditions mean Sagar Pandey, a civil engineer in Southern California, can take his time shopping for a home in San Ramon. "I have a lot of family members up there and it's time for me to slow down a little bit," he said.

 Pandey plans to look around for at least two months to find the right place.  It's taking longer to sell a home in Contra Costa County, especially homes priced around $700,000 to $800,000, said Marilyn Cunningham of Executive Brokers in Walnut Creek.

 "We have seen a slowdown in our pending sales" in August, she said, a change from six months ago when "in three days you had at least several offers. There's definitely been a shift in the market."

Nearly 10 percent of the homes listed last week in central Contra Costa County had price reductions, said Kevin Kieffer, a Danville real estate agent. He said some sellers overshot the market and had to pull back. "There's more of a selection for buyers, and more of an opportunity to come in at the asking price or even below it," he said.

 Even in Silicon Valley, where the number of homes for sale has dropped since August, the frenzy has eased because there are fewer buyers, said Carl San Miguel, president of the Santa Clara County Association of Realtors. "The pressure is off at this point," he said.

Caroline Miller, president of the Silicon Valley Association of Realtors, said a home that sold last week for $730,000 after a $5,000 price reduction fetched three offers. "Two months ago I would have had six or seven offers on this little house in Campbell as opposed to three or four," Miller said.

Condos, which made up about a fifth of all sales, are still going strong, with sales at an eight-year high for the month of August. The median price of a condo was $445,000, up 39 percent from a year ago.

Top 10 Housing Markets for Year-Over-Year Price Gains

 

This list shows how single-family home prices changed from July 2012 to July 2013. These rankings are based on a repeat-sales index that tracks increases and decreases in sales prices and includes distressed sales.

1. Los Angeles-Long Beach-Glendale, CA +22.62%

The Southland housing market includes the cities of Los Angeles, Long Beach and Glendale, Calif. It’s also one of the hottest real estate markets in the country right now, with home prices rising more than 22% annually, according to CoreLogic.
It’s so hot, in fact, that some analysts are starting to use the “bubble” word. According to Jed Kolko, chief economist for the real estate website Trulia, Los Angeles is one of only two metropolitan areas in the U.S. where home prices are more than 10% overvalued (Orange County is the other).
To be clear, home prices in the Los Angeles area are still well below the 2006 peak that occurred during the housing bubble. So there’s no quantifiable cause for concern — yet.

2. Riverside-San Bernardino-Ontario, CA +22.53%

The Inland Empire housing market (which includes the cities of Riverside, San Bernardino and Ontario, Calif.) has also seen major home-price gains over the last year. Prices jumped 22.53% from July 2012 to July 2013, according to CoreLogic’s HPI report.
San Diego-based DataQuick also reports strong numbers for this region. The median sale price for the Riverside housing market rose nearly 26% in July, compared to the same month last year. San Bernardino’s MSP climbed 24.2% over the same period.
Just don’t expect these trends to continue. The number of homes for sale across this metro area is rising sharply. One of the reasons we are seeing such significant price gains in the Riverside and San Bernardino real estate markets (and across much of California) is because inventory plummeted over the last couple of years. But now it’s rising again. This will likely have a cooling effect on local home prices.

3. Phoenix-Mesa-Glendale, AZ +18.10%

Much can be said about the Phoenix real estate market. It was one of the cities hit hardest by the housing crisis. Home prices in the Phoenix-Mesa-Glendale metro area started to plummet in 2006 and didn’t find a solid bottom until the fall of 2011. Today, however, this is one of the fastest rising markets in the country.

4. Atlanta-Sandy Springs-Marietta, GA +15.61%

Atlanta’s housing market is leading the charge in the eastern half of the country. After falling longer and further than most east-coast metros, home prices in Atlanta are now rebounding strongly. Prices in this metro area rose by nearly 16% in July, compared to the same time last year.
Atlanta was also a standout in the latest S&P/Case-Shiller Home Price Index, posting the largest monthly gain of the 20 composite cities.
But here again, we are seeing a significant change with inventory trends. The number of homes for sale in and around Atlanta fell sharply toward the end of 2011, and into the first part of 2012. But the trend is reversing. According to Realtor.com’s monthly housing summary, the total number of active listings in Atlanta’s real estate market has risen by 17.85% in the last year.
Bottom line: Inventory is still tight in this market, but it probably won’t stay that way. Expect home-price appreciation to wane somewhat over the coming months.

5. Houston-Sugar Land-Baytown, TX +11.3%

Job gains and growing demand for housing have yielded strong numbers for the Houston real estate market. According to the Houston Association of Realtors (HAR), home sales rose by a whopping 26% in July, compared to a year earlier.
Listing volume has declined in this market as well, but the inventory crunch seems to be easing. “We are seeing more homes listed for sale, which should help bring the supply-and-demand scale into healthier balance,” said HAR chairman Danny Frank.
See: Texas real estate roundup for August 2013

6. Dallas-Plano-Irving, TX +10.03%

Call it the Texas two step. Like Houston, the Dallas metro area has also moved into the top ten for home-price gains, according to CoreLogic’s latest report.
The broader Texas economy is thriving right now. This is largely the result of oil and gas production, combined with brain drain from other states like California. Job growth in the major metros of Dallas, Houston and Austin has been strong and steady over the last year. When last measured in July, the unemployment rate for Dallas had fallen to 6.4%, below the national average of 7.7%.
But not everyone is happy about the price gains within Dallas’s real estate market. According to Steve Brown, housing writer for the Dallas Morning News: “The pace of home price increases in North Texas is unprecedented and unsustainable. And the quicker the market cools down, the better it will be for everyone.”

7. Washington-Arlington-Alexandria, DC-VA +9.07%

Washington, D.C. was one of the first U.S. housing markets to recover, after the nationwide crisis that began in 2008. We reported on this as far back as January 2011, when the first signs of a rebound were emerging.
The difference here, when compared to some of the cities listed above, is that home prices in Washington, D.C. have been rising steadily over a longer period of time. When viewed on a graph, it’s a gradual upward slope, as opposed to a sharp spike. This is a good thing.
According to Washington Post writers Sheree Curry and V. Dion Haynes, local real estate agents are reporting multiple offers on desirable properties, as buyers and investors compete for limited inventory. Talk about a blast from the past.

8. Chicago-Joliet-Naperville, IL +8.63%

We covered the Chicago real estate market in depth a few days ago (see: Winds of Change Blow Into Windy City). So I won’t rehash it all here. Suffice it to say the Chicago housing market has changed dramatically over the last year and a half. Inventory has declined and continues to fall. This is driving prices up, as evidenced by the CoreLogic numbers and also those reported by Zillow and Realtor.com.
According to Realtor.com, the median list price for this market has climbed by nearly 20% over the last year or so. Meanwhile, Zillow reports a 16% jump in the median sale price. Whether listing or selling, the trend is the same. Values are rising.

9. New York-White Plains-Wayne, NY-NJ +7.82%

The housing recovery took longer to reach New England than, say, California and the Southwest. But it’s getting there. Home prices in the New York metro area have risen by nearly 8%, according to CoreLogic. The New York State Association of Realtors (NYSAR) reports a 16.4% increase in closed sales for the month of July, compared to last year.
It’s a good time to be a seller in this market. “The combination of strong buyer demand and constrained inventory levels continue to drive median price gains as sellers received nearly 96 percent of their asking price in July,” said Duncan MacKenzie, the chief executive at NYSAR.
The speed of recovery is mixed across this metro area. For instance, Zillow reports a 4.7% year-over-year increase in the median sale price for White Plains, N.Y.. In Newark, N.J., the MSP rose by 18.4% during the same period.

10. Philadelphia, PA +4.29%

I’m actually surprised to find Philadelphia on CoreLogic’s top-ten list for metro-level price gains. The median list price for the Philadelphia housing market has been mostly flat over the last year or so. Additionally, Philly’s unemployment rate is still higher than the national average. The jobless rate was 10.8% in July, according to the Bureau of Labor Statistics. This limits demand for housing.
As for the future of this market, much will depend on the inventory situation. For-sale inventory has declined a bit recently in the Philadelphia real estate market. If that continues, it could drive additional price gains. Otherwise, appreciation will level off.
Disclaimer: This story makes forward-looking statements about various housing markets across the country, as well as broader economic trends. Such statements should be viewed as matters of opinion, not as matters of fact. We make no guarantees or assertions about future economic conditions within the cities and metro areas listed above