The supply of homes is expected to increase nationally next year for the first time since 2015 — but not in the Bay Area.
Since last November, the number of active listings in the San Jose metropolitan area has declined more than 40 percent, while it has dipped 18 percent in the San Francisco metropolitan area. That’s according to realtor.com, which predicted a rebound nationally in its 2018 National Housing Forecast.
The two Bay Area “metro areas differ from the trend that we’ve observed in other parts of the country,” said Danielle Hale, chief economist for realtor.com. Next year is expected to mark “a significant inflection point in the housing shortage” for the nation as a whole, but the Bay Area picture is less rosy.
More than in most parts of the country, potential sellers choose to stay in their homes in the super-expensive Bay Area market.
Real estate agents and other industry observers chalk that up to a variety of factors: Homeowners don’t want to pay capital gains penalties, preferring to sit on their equity. Besides, where would they move in a region where numerous counties have median sales prices of more than $1 million for a single-family house?
What’s left is an unusually tight market where buyers compete and push prices up.
Even so, the new report suggests a moderating Bay Area market, at least when compared to the conditions that existed here a few years back, when double-digit, year-over-year price growth was the norm.
The 2018 forecast from realtor.com shows year-over-year sales up 2.5 percent and prices up 4.37 percent in the San Jose metropolitan area, which includes Santa Clara and San Benito counties. In the San Francisco metropolitan area — which includes San Francisco, San Mateo, Marin, Alameda and Contra Costa counties — realtor.com projects a smaller sales increase of 0.94 percent and price growth of 5.14 percent.
That compares to a 2.5 percent year-over-year increase in national sales of existing homes and 3.2 percent price appreciation in 2018. The report also predicts 7 percent growth in new single-family housing starts across the U.S.
In the Bay Area, new home construction “has shown signs of picking up recently,” Hale said. “New construction to help meet strong demand from growing households is a prerequisite for an inventory turn-around in the Bay Area.”
The report predicts an average mortgage rate throughout the year of 4.6 percent on 30-year fixed loans, reaching 5.0 percent by year’s end. And it notes one “major wildcard” that could wind up jumbling the numbers: the impact of tax reform legislation being debated in Congress.
As for the national inventory, the supply of available homes is expected to shrink in the first few months of the year, but the rate of decline will slow. Finally, the report predicts, year-over-year inventory growth will “tick up into positive territory by fall 2018, for the first time since 2015.”
Most of the home supply growth is expected to occur in the mid-to-upper tier price range, which includes U.S. homes priced above $350,000. The supply of starter homes will take longer to bounce back because their levels have been “significantly depleted by first-time buyers,” the report said.