Bay Area home prices hit record as sales drop

Updated 5:50 pm, Wednesday, May 24, 2017

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The median price paid for a Bay Area home last month surged to a record — $750,000 — as the inventory of homes for sale continued to fall far short of demand, according to a report released Wednesday by the research firm Corelogic.

The median price paid for new and existing single-family homes and condos in the nine-county region was up 4.9 percent from a revised $715,000 in March, and up 8.7 percent year over year, the report said. Prices typically rise between March and April, but only by 2.6 percent on average.

Adjusted for inflation, however, last month’s median price remained about 7 percent below its June 2006 peak.

In San Francisco, the median was $1,247,500. For that price, you might be able to pick up something like 221 Steiner St., a two-bedroom, one-bathroom Hayes Valley condo. The condo, which is listed at $1,249,000, has 1,525 square feet of “gracious living space,” according to its ad, and monthly homeowners association fees of $500.

KTVU’s Frank Mallicoat reports that the Bay Area housing market is not slowing down, thanks to a new generation of home buyers

Media: KTVU

Sales also typically rise between March and April, as the weather improves and families get ready to move over the summer. But last month they declined on both a month-to-month and year-over-year basis. A total of 6,943 new and existing homes and condos sold in April, down 5.1 percent from March and 9.2 percent from April 2016.

“I just sold a home, the buyers were tired of getting outbid and went way overboard,” said Murline Monat, an agent with Paragon Realty Group in Danville. The Castro Valley home was listed at $695,000, and the seller accepted an offer that was “well over $800,000,” she said.

That kind of overbidding is not unusual in Oakland or Berkeley, where homes often sell for $50,000, $250,000 or $500,000 over asking, she said. The Castro Valley deal has not closed, and Monat believes the appraisal will come in at least $25,000 below the accepted offer price. Because the buyers had released their appraisal contingency to sweeten the deal, they will have to increase their down payment by the difference between the appraised price and the offer price, Monat said.

The median home price rose in every Bay Area county last month except San Francisco, where it fell 4 percent on a year-over-year basis but rose 5.3 percent from March. (CoreLogic had to estimate San Francisco sales for the last week of April.)

Real estate agents blame the current situation largely on a persistent lack of inventory, which has plagued the region since around 2013.

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The California Association of Realtors reported this week that the median amount of time it would take to sell all Bay Area homes on the market at the current sales rate was 2.4 months in April, down from 2.6 months the previous April and about half the historical average of 5.1 months. The statewide “unsold inventory index” was 3.3 months in April and 4.2 months nationwide, said Jordan Levine, the association’s senior economist.

The median time it took to get an offer accepted on a Bay Area home was just 20.1 days last month, down from 20.4 days a year ago and about half the long-term average of 36.8.

Although it’s acute in the Bay Area, a lack of inventory is a problem nationwide.

“Homebuyers have been stymied by low inventory over the past few years, and the trend continued in April. The number of homes on the market fell yet again last month, dropping another 8.7 percent from last year. This home buying season has not brought the relief they so desperately need,” Trulia Chief Economist Ralph McLaughlin said in a report Wednesday.

He noted that the number of homes on the market per 10,000 households hit an all-time low of 15.5 in April. McLaughlin attributed the nationwide shortage to several factors.

“First and foremost is demographics,” he said. “Many of those who own homes in the U.S. are older, and older households, aging households, tend to move less.”

During the recession, he added, “many homes foreclosed upon were bought up by investors and turned into rental units.”

Also, there are still many homes that have not reached their pre-recession peak. “Owners of those homes are waiting for home values to surpass that peak,” before putting them on the market. Even if the owners owe less than their home is worth and could pay off the mortgage if they sold, “they say I’m not going to sell for less than what it was worth 10 years ago,” McLaughlin said.

Finally, in some markets, rising income inequality has helped widen the price gap between starter, move-up and luxury homes. “As the price points spread out, it gets harder for owners to trade up,” McLaughlin said. Instead of moving up, “they will stay put and renovate.”

Although more new homes are being built, construction nationwide is still about 65 percent of the 50-year average relative to the size of the population. More construction would help, but it can’t solve the problem considering that new homes typically account for only one out of 10 homes on the market.

On the plus side, if you can call it that, 40 percent of Americans age 18 to 34 (excluding college students) are still living with parents or relatives, the highest percentage since around 1940. “We see from surveys they very much want to be homeowners, but their current financial circumstances are preventing them from living on their own or buying,” McLaughlin said.

“They are the largest potential cohort of homeowners in the U.S.,” McLaughlin said. “God forbid that they all decide to move out at once. There would be a huge rush of demand without a lot of supply and prices would spike.”

As dire as it seems, affordability in the Bay Area has been worse. Currently, only 25 percent of households can afford the median-price home, according to the Realtors association. This number — which takes into account median incomes and prevailing mortgage rates — is 32 percent statewide and 57 percent nationwide.

But in the summer of 2007, only 10 percent of Bay Area households could afford the median priced home. Even though prices have risen sharply since then, so have incomes, and mortgage rates have come down, the Realtors association’s Levine said.

Kathleen Pender is a San Francisco Chronicle columnist. Email: Twitter: @kathpender

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