Bay Area Median Home Price Hits New Record Peak

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's 2018 Real Estate Market Predictions-No Bubble in Sight

 

A real-estate site’s predictions for 2018 offer yet more disappointing news for would-be first-time homebuyers in California hoping that the New Year might bring some relief.

“The outlook for next year is rising prices, rising rates and rising property taxes,” said Redfin’s chief economist, Nela Richardson. “I wish I could have better news.”

Here is how Redfin’s housing market team predicts that the new year will shake out:

• California exodus: Buyers in high-tax states such as California will move elsewhere if 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 is over $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 rates will 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.”

October Bay Area Housing Sales Slow, but Pricing Takes a Big Jump

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.”

Bay Area Ranks as Nation's Most Competitive Real Estate Market

 

 

The San Jose metropolitan area posted the nation’s steepest year-over-year plunge in the number of homes for sale in October — falling by a precipitous 51.6 percent.

With buyers competing for so few listings, San Jose also posted the nation’s sharpest year-over-year rise in the median cost of a home: up 19.2 percent to $1,049,000. That’s according to a new analysis by Redfin, which analyzed 74 U.S. housing markets with populations of 750,000 or more. Nationally, the home supply shrank for the 25th consecutive month, down 12.2 percent from a year earlier.

“Buyers are just flocking from one property to the next,” said Kevin Swartz, a Saratoga-based agent for the Sereno Group. “We’re at this point where they’re just making offers on whatever is available, because it’s so limited.”

The Redfin report also ranks the Bay Area’s three main metro areas as the most competitive markets in the U.S. Combining data for single-family homes, condominiums and townhouses, it ranks San Francisco as the nation’s most competitive market, with 78.6 percent of homes selling for above the list price in October. San Jose ranked second, with 76.3 percent of homes going for above list, and Oakland ranked third, with 63.7 percent of homes selling for more than the asking price.

 

Bay Area markets also figured among the five “fastest” metro areas in the U.S.

The speediest market was Seattle, where homes typically sold in 10 days, according to Redfin. Second speediest was San Jose (12 median days on market) and third was Boston (14 days). Oakland and San Francisco tied for fourth place; homes spent 15 median days on the market in both metros. Nationally, the typical home spent 44 days on the market, down from 49 in October 2016.

Underlying all these trends are the chronically low levels of homes for sale. Thursday in all of Santa Clara County, Swartz pointed out, only 620 single-family homes were on the market. Adding condominiums and townhouses to the mix, the total still only grew to 745 listings.

San Jose’s 51.6 percent year-over-year tumble in the number of homes for sale was unmatched, though San Francisco had the second steepest decline in the U.S., 28.5 percent. Oakland was close behind, with a 25.5 percent year-over-year drop. As the supply of available homes contracts, buyers keep putting pressure on prices. The median price of a home in the San Francisco metro area hit $1,282,200 in October, up 4.7 percent year-over-year. In the Oakland metro area, it climbed 13.1 percent year-over-year to $690,000, according to Redfin.

Only eight of the 74 metros showed year-over-year increases in inventory. Those were mostly in the South and Midwest. Raleigh, N.C., had the largest jump in the number of available homes, up 16.1 percent, followed by Baton Rouge, LA (12.9 percent), Austin, Texas (8.8 percent), New Orleans (7.5 percent) and St. Louis (4.8 percent).

With home supplies chronically low in most U.S. metros, sales “are sputtering,” said Nela Richardson, Redfin’s chief economist. “The last time we saw a substantial increase in the number of homes for sale, Donald Trump was a candidate in a Republican field of 11.”

Also on Thursday, the California Association of Realtors (C.A.R.) issued its October report on the statewide housing market.

Looking at existing, single-family homes, C.A.R. reports that the median price in the nine-county Bay Area is $892,720, up 11.1 percent year-over-year.

County by county, again for single-family homes, here are a few more numbers.

The Contra Costa County median was $615,000, up 6.1 percent, while the Alameda County median was $862,450, up 11.3 percent. In Santa Clara County, the median was $1,242,500, up 18.6 percent. In San Mateo County, the median climbed 12.8 percent to $1,522,500, and in San Francisco County it rose 13.3 percent to $1,594,000.

Proposed Mortgage Cap Tax Cuts Could Hit Bay Area Homeowners Hard

 

WASHINGTON - House Republican leaders on Thursday proposed legislation that would overhaul the U.S. tax code and jettison numerous tax breaks that Americans and businesses have used for years to limit their taxable income.

The release of the proposals launched into motion a frantic political effort that could impact almost every American. In a number of cases, the tax plan cuts back on tax benefits for families and individuals while expanding tax benefits for companies.

The Tax Cuts and Jobs Act would lower the corporate tax rate from 35 percent to 20 percent and collapse the seven tax brackets paid by families and individuals down to four. It could create giant new benefits for the wealthy, cutting business taxes, eliminating the estate tax, and ending the alternative minimum tax.

 

It would also jettison numerous tax breaks that Americans and businesses have used for years to limit their taxable income. in half the popular mortgage interest deduction used by millions of American homeowners, capping this tax deduction at new mortgages of $500,000 or less. Presently, Americans can deduct interest on mortgages of up to $1 million from their income.

This change could have a particularly big impact on high cost areas, such as San Francisco, New York, Boston, and the Washington D.C. area, and housing groups and lawmakers will likely try to defeat it. The bill would allow people to deduct their local property taxes from their taxable income, though this benefit would be capped at $10,000.

The bill's true impact on the middle class will be difficult to immediately measure. The bill would create a new "Family Credit" and expand the child tax credit used by working families. The child tax credit would grow from $1,000 per child to $1,600 for each child.

The bill would nearly double the standard deduction that many Americans claim on their taxes, raising it from $12,700 to $24,000 per family. But this benefit would be partially offset by the personal exemption many Americans can claim, which can be large for families with multiple children.

Families would also no longer be able to deduct their state income taxes from their federal taxable income, another change that would have a particular impact on places like New Jersey and New York, where state taxes are higher than in other areas.

And Americans would no longer be able to deduct their medical expenses or property and casualty losses, according to a document outlining the plan.

The legislative fight over the tax bill has become the Trump administration's biggest political goal, after failed attempts to repeal the Affordable Care Act. President Donald Trump wants the legislation to pass the House and the Senate by the end of the year, though they must resolve numerous differences.

The bill would add $1.5 trillion to the debt over 10 years, but Republicans believe the changes would trigger a surge in economic growth, higher wages, and job creation.

Other changes in the bill would be far reaching. It would, for example, make changes to college savings programs and have new requirements for tax-exempt organizations like churches and charities.

North Bay Area Home Prices Surge After Sonoma Fires

A shortage of homes for sale combined with strong demand continued to push up Bay Area home prices last month, and the situation is only going to get worse in the North Bay when those displaced by the wildfires seek new housing.

The inventory shortage is statewide but “particularly acute in the Bay Area,” the California Association of Realtors said in news release.

On Friday, CoreLogic reported that the median price of new and existing single-family homes and condos in Bay Area hit $739,000 in September. That was up 13.7 percent from September 2016, the largest yearly gain for any month since January 2014. It was down 0.1 percent from August, reflecting a normal seasonal slowdown.

The number of homes sold fell to 7,338 last month, down 13.6 percent from August and down 7.5 percent from September 2016.

It’s too early to know what impact the Wine Country fires, which started Oct. 8 and destroyed an estimated 8,800 structures, are having on home prices and sales in the North Bay. The CoreLogic report reflects transactions that were recorded in September.
Anecdotally, real estate agents say that sales in Sonoma County have picked up as buyers who were taking their time before the fires rushed to nab a house before demand from fire victims grows.

At the same time, “We’ve had a rash of fire victims buying for cash,” said Diana Gorsiski, president of the North Bay Association of Realtors. “Even if they are rebuilding, they know it’s going to be two to three years minimum.” Given the tight rental market, some would rather buy than rent in the meantime.

Some fire victims are looking into a loan for disaster victims backed by the Federal Housing Administration. Called a Section 203(h) loan, it’s made by qualified lenders to people who lost a primary residence they owned or rented in a major disaster and are rebuilding or buying another single-family home or condo.

Buyers can borrow up to 100 percent of the purchase price of the replacement home. When lenders are calculating the debt-to-income ratio on the disaster loan, they don’t have to count the mortgage on the destroyed home if they had adequate insurance and are working with their original lender to apply insurance proceeds to that loan, said Michael Regan, sales manager with Stearns Lending in Petaluma.

The maximum loan amount is the same for all FHA loans and varies by county: It’s $595,700 in Sonoma and $636,150 in Napa. Borrowers pay the usual FHA mortgage insurance premiums.

Regan has firsthand knowledge of the housing market. He recently purchased a home and was going to put his existing Petaluma house on the market just before the fires broke out. He waited a few weeks and listed it a week ago Saturday. By Saturday afternoon, he had two cash offers, both for more than the asking price. He said the last two homes in his neighborhood, Adobe Creek, sat on the market for 40 to 50 days before the fire.

“It’s definitely not the same market it was before the fire,” said Rick Laws, senior vice president with Pacific Union International in Sonoma County. People who “had the ability” began looking to secure housing even before the fires were out.

“We have some highly qualified and motivated renters and buyers who are offering significantly over-market prices,” for homes and long-term leases, he said. He suspects this flurry of activity will subside soon and things will become less volatile. But he also knows that “we are going to run out of housing before we run out of need.”

  Before the fire, Sonoma County had only three months of unsold inventory, meaning it would take three months to sell all homes on the market at the current pace of sales. Inventory averaged 2.2 months in the Bay Area (compared with a long-term average of 4.4 months) and 3.2 months statewide.

 There are many reasons for the inventory shortage. One is that new construction “remains well below anything close to a normal level historically,” said CoreLogic analyst Andrew LePage. New-home sales this year are 5.1 percent below last year’s level.

The Realtors association contends that many long-term homeowners won’t sell because their property taxes would go up if they bought a new home, even a less expensive one. In California, homes generally are reassessed for property taxes only when they are sold. Many long-term owners are paying much less than they would if they bought the same house today, which has a lock-in effect.

California homeowners who are 55 or older get a once-in-a-lifetime chance to sell their primary residence and buy another of equal or lesser value and transfer their property tax base from the old house to the replacement house. However, the new home must be in the same county or in one of 11 counties that accept transfers of property tax values.