Bay Area home-price slump continues

Bay Area home prices slumped for a sixth straight month in August, according to a report issued Thursday by research firm CoreLogic.

The median price paid for a new or existing Bay Area home or condo was $810,000 last month, down 0.7% from July and down 2.4% from August of last year. Prices year-over-year have now been flat or falling for six consecutive months. The last increase was in February.

Although the Bay Area’s frantic housing market started cooling around June 2018, prices year-over-year continued rising at double-digit rates until September of last year, when the market downshifted amid a jump in interest rates and a stock market selloff. From last fall into early this year, inventory grew and price cuts started appearing, but the median price continued rising until March, when it fell for the first time in 83 months. The biggest dip this year was 4.1% in July.

Four Bay Area counties posted year-over-year price drops in August, the largest being Santa Clara’s 8% decline. The other five posted increases, the largest being a 2.9% gain in San Francisco, where the median was $1.35 million, highest in the region.

San Francisco, Oakland-Berkeley and to a lesser extent San Mateo County have been outperforming the rest of the Bay Area since spring, according to Patrick Carlisle, chief market analyst with the Compass real estate brokerage. “My best guess is that the differentiating factor (in these markets) is all the IPOs that have occurred over the last six months,” he said — even though it wasn’t “the hysterical jump” in prices that some were anticipating.

Some studies have shown that initial public offerings do raise home prices somewhat, with the biggest gains coming closest to the company’s headquarters. The impact fades the farther you get in distance and time from the IPO. That seems to be happening now, Carlisle added.

Cyd Greer, a Coldwell Banker agent in the Napa Valley, is suddenly seeing a lot of activity at the top of the market. “I got five offers on four properties in the $5 million to $6 million range in the last week,” she said. But none was from buyers with IPO money. “Oftentimes, the IPO people buy a primary residence in the city, at some point they will come up here” to buy a vacation home. Activity in the low- to moderate-price range has been slower, she said.

Sales were sluggish throughout the Bay Area last month. Only 7,247 transactions closed in August, down 2.3% from July and down 5.7% from last August, according to CoreLogic.

Even though prices and mortgage rates have come down this year, affordability remains a problem for many buyers, and that’s crimping sales, CoreLogic analyst Andrew LePage said.

The average rate on a 30-year fixed-rate mortgage was 3.64% this week, down from 4.72% a year ago, according to Freddie Mac.

The roughly one-percentage-point drop in mortgage rates reduced the monthly payment on a median-priced Bay Area home by 13%, LePage said.

Santa Clara and Sonoma counties have seen “the most dramatic cooling” since the middle of last year, Carlisle said. Those had been the Bay Area’s two hottest markets before the market shifted in the spring of 2018.

Santa Clara’s market had been driven largely by job growth. In Sonoma County, prices surged after the October 2017 wildfires as people raced to replace homes even before the flames were extinguished.

By early 2018, prices in both counties had reached the breaking point. “It’s almost like people were saying, ‘I can’t do this anymore,’” Carlisle said.

Sonoma County may have seen a rebound last month, or maybe not.

Earlier this month, when the California Association of Realtors issued its report on August home prices, it showed a 6.3% surge in the median price for Sonoma County — by far the biggest year-over-year jump in the Bay Area.

Data from Sonoma real estate groups also showed a late-summer spike in prices, leading some to believe that people who had lost their homes in the wildfires were rushing to buy a new one before their insurance money for additional living expenses runs out. Some companies cap these payments at two years, and the two-year anniversary of the North Bay fires is next month.

CoreLogic’s report for August, however, showed a mere 0.8% increase in year-over-year prices for Sonoma County.

The California Association of Realtors’ report only includes existing, single-family homes. CoreLogic’s report is broader; it also includes new homes and condos, along with sales that were not entered on a Multiple Listing Service. But those differences alone can’t explain the big discrepancy between the two numbers for Sonoma County.

Gerrett Snedaker, who owns and runs the Better Homes and Gardens Wine Country Group in Napa and Sonoma counties, said his agents have seen no rush of people buying homes before their insurance money runs out. “They are not working with a lot of fire survivors who are running up the prices,” he said. “We anticipated some of that, but I believe most folks have already made arrangements. Some bought something else, or moved on, or are continuing to lease where they are at their own expense.”

There has been a big jump in the number of fire lots being listed for sale, however. There are 542 on the market, the highest on record, Snedaker said.

The sale of fire lots could be impacting data.

Craig Curreri, a broker associate with Coldwell Banker in Santa Rosa, said he pulled some numbers that showed prices rising 5.1% in Sonoma County prices year over year. But he attributed the August increase to “normal supply and demand,” not purchases by people who lost homes in the fires.

In a statewide housing forecast issued Thursday, the California Association of Realtors said it expects that existing, single-family home sales statewide will hit 390,200 units this year, down 3.1% from 402,800 last year. The median price for these units will likely hit hit $593,200 this year, up 4.1% from last year.

For next year, it expects that sales statewide will rise 0.8% to 393,500 units, and prices will increase more modestly than this year — by just 2.5% — to $607,900.

In the Bay Area, price growth will be flatter than the statewide average, but that could help sales, which are likely to be in line with the statewide average, said Jordan Levine, the association’s deputy chief economist.

The “more affordable markets with proximity to the Bay Area,” such as Solano, Yolo and Stanislaus counties, will see the fastest appreciation, he said.

Levine said the new $10,000 limit on the federal deduction for state and local taxes is weighing on home sales and prices in the Bay Area. The limit “has definitely made renting more attractive than it was a year ago,” he said.

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

Article source: https://www.sfchronicle.com/business/networth/article/Bay-Area-home-price-slump-continues-14470531.php

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