That Bay Area home sales are sluggish isn’t a surprise. But the slowest October in three years? That is.
A new report on the region’s residential real estate market reinforces that the market continues to slow — while home prices keep climbing. The number of single-family homes sold in the nine counties was down 1.5 percent in October from the year before, according to the CoreLogic real estate information service. Looked at historically, sales were 9.2 percent below the average October, going back three decades.
It was the third straight month that regional sales were up or down 2 percent or less on a year-over-year basis.
“That’s basically flat,” said Andrew LePage, the service’s research analyst. “And why is that, since job growth is good and mortgage rates — even with the recent increase — are basically low? It’s largely because of buyers’ affordability concerns and the region’s inventory constraints.”
We’ve been hearing this for a while now.
The tight housing supply, coupled with high prices and challenging loan-qualification hurdles, practically guarantees a low volume of sales. At the same time, with job growth continuing to fuel demand, prices haven’t stopped climbing. It all adds up to the ongoing crisis: not enough houses, generally, and not enough affordable housing, specifically.
The annual rate of appreciation has ratcheted down into single digits in most locales, and many analysts agree the market is losing steam. Still, look at these median prices for single-family houses in the month of October: $499,000 in Contra Costa County (up 9.7 percent from the year before); $702,500 in Alameda County (up 6.4 percent); $940,000 in Santa Clara County (up 8.3 percent); and $1.268 million in San Mateo County (up a whopping 24.7 percent).
That San Mateo County figure is an all-time high — though LePage expressed caution, calling it “a record with an asterisk,” since the county’s reporting of closings toward the end of October was incomplete. Once all the data is collected, the number could be adjusted downward.
Even so, the region’s prices, especially in Silicon Valley hot spots, can continue to surprise.
“We defy gravity,” said Alain Pinel[comment=”CQ”] agent Mark Wong. Buttressing his point, he compiled a list of 15 properties that recently sold for $200,000 or more above asking. Then he added a 16th to the list: a 2,249 square-foot, three-bedroom house in Mountain View that sold in November for $2 million — $502,000 over the listing price.
Chris Trapani, founder and CEO of the Sereno Group, offered a more sober assessment of the local market. Looking at the Multiple Listings Service earlier this week, he noted that only 1,082 homes were on the market in all of Santa Clara County, where inventory has diminished over the last three years to a level he described as “crazy. We’re comparing low to low.”
According to his analysis, the median home price for a single-family home in the county appreciated by about 11 percent from 2014 to 2015 and is on pace to increase by around 8 percent from 2015 to 2016. He expects seasonal demand to create a new bump in prices heading into the new year, with a “modest appreciation for 2017 in the 4 to 5 percent range.”
CoreLogic’s report for October gives one last look at the market prior to the presidential election. What happens next “is far from clear,” said LePage. Whether the administration of President-elect Donald Trump will move to loosen guidelines for loans, and whether rates will continue to climb — it’s all an unknown.
Rates already have risen about half a percentage point since the election, and the Federal Reserve is said to be considering another increase in interest rates this month.
“I’m looking at a quarter point,” predicted William Doerlich, president-elect of the Bay East Association of Realtors. Such an increase might “stimulate activity on the part of buyers in the first quarter of 2017,” he said. “People are going to look at that quarter point and say, ‘You know, I better get off the fence before it goes up even further.’ ”
But in the long-term, Doerlich, Trapani and other market observers agreed, a sustained increase in mortgage rates could seriously discourage buyers.
That’s one reason agents are encouraging homeowners to sell now — before further headwinds develop.
In Milpitas, homeowner Wayne Fong recently sold the three-bedroom house he co-owned with his aunt for $635,000. Guided by agent Wong, he had listed the house for $599,950.
“It’s an old house, a fixer-upper, so it’s better to go in low and be realistic about it and let the local market bid it up,” Fong said.
The strategy worked. He and his aunt received seven written offers within a week and turned a tidy profit on the 1,067-square-foot house, purchased for $170,000 in 1996. Sold in as-is condition, it had appreciated by more than 370 percent.
“It all went very smoothly,” Fong said.
In Martinez, Mark Cowherd listed his house — three bedrooms, two baths, 1,500 square feet on a corner lot — for $609,900 in mid-October after fixing up his backyard, installing new floors and replacing appliances. Doerlich, his agent, held a series of open houses that generated two offers, including the one accepted by Cowherd for $605,000.
A history teacher at Piedmont High School, Cowherd has had roots in Martinez since 2003. But commuting to work has “taken a toll on me. I’m 19 miles door-to-door from work, and it’s taking an hour to get home these days. It’s quality of life. I’m trying to get my commute down to 15 minutes or under — that changes my life.”
He has identified several Oakland neighborhoods in which he would like to buy a new house, including Montclair. In September and October, he bid on five or six houses and was “blown out of the water” by the competition. Lately, he senses, “the craze is slowing down a little bit” and there are far fewer choices.
“Right now there’s nothing out there,” he said, sounding a little nervous. The buyers of his Martinez home have given him until late January to find a new place.
“It’s going to be an interesting winter,” he said.