Updated 9:27 pm, Wednesday, May 24, 2017
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 from March to 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.
That’s little solace to Bay Area house hunters. “The competition is very fierce,” said Luke Vernagallo, 28, who is looking for a home in the East Bay for $500,000 to $600,000. He and his wife own a one-bedroom home in Hayward but would like to upsize and start a family. “We had been looking haphazardly for the last couple years, hoping the market would take a downturn,” but that never happened. So now they are looking more seriously.
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“We offered on one home, above asking, but were beaten out by a substantial amount,” Vernagallo said. “We have determined a fair amount of time, it’s not even worth it to submit an offer because we know it will go for (an amount) extraordinarily higher than the listing price.” So now they are targeting homes that need more work than they originally anticipated. “We are looking for a diamond in the rough,” he said. “Maybe we will win the lottery” and get one.
In San Francisco, the median price last month was $1,247,500. For that amount, you might be able to pick up something like 221 Steiner St., a two-bedroom, one-bathroom Hayes Valley condo. The condo, 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.
Sales typically rise from March to 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 year-over-year but rose 5.3 percent from March. The year-over-year drop was largely due to a drop in condo prices; the single-family median rose.
Real estate agents blame the current situation largely on a persistent lack of inventory, which has plagued the region since around 2013.
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, 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 days.
Annie Shen, 30, started looking for a place in November, thinking she might score a bargain during real estate’s slow season. Priced out of her preferred neighborhood (North Oakland-Berkeley), she made an offer on a townhome in Emeryville around Thanksgiving, but it went for more than $100,000 over asking.
So last week, she put a 3 percent deposit down on a two-bedroom, 2.5-bathroom unit under construction in West Oakland in the Station House development. Buying new “is a little bit easier. The ($725,000) list price is what they are going to sell at,” she said. “But it’s still a gamble. They are not going to be done with it until late this year or next year. They can’t promise the exact square footage” or what features and finishes will be available.
And there’s no telling where mortgage rates will be when she closes.
Although it’s acute in the Bay Area, inventory is tight nationwide. The number of homes on the market per 10,000 households hit an all-time low of 15.5 in April, said Trulia Chief Economist Ralph McLaughlin. He 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.”
And many homes still have not reached their pre-recession peak. “Owners of those homes are waiting for home values to surpass that peak,” before selling. 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. But in the summer of 2007, only 10 percent of Bay Area households could afford the median-price home. Even though prices have risen sharply since then, so have incomes, and mortgage rates have come down, Levine said.
Kathleen Pender is a San Francisco Chronicle columnist. Email: firstname.lastname@example.org Twitter: @kathpender