Bay Area home prices top $1 million in April

Spring home-buying season in the Bay Area exploded in April, with brisk sales and prices topping $1 million for the second straight month.

The median price for an existing single-family home in the nine-county region reached $1.15 million in April, driven by tight supply and intense demand for suburban space. The price marks a 12% increase from March, signaling a favorable trend for home sellers but more costly bidding wars for buyers, according to CoreLogic and DQNews data.

Still, economists and agents say the frothy market isn’t a bubble — just a reflection of the Bay Area’s economic strength, home buyer demand and too few available homes.

CoreLogic deputy chief economist Selma Hepp said pent-up pandemic demand is driving prices. “It’s traditional buyers, not speculators,” Hepp said. “When you think ‘bubble,’ you think some speculation is going on. But it’s not speculation.”

An analysis of FHA loans by housing researchers at the American Enterprise Institute of Bay Area properties — especially in San Francisco, Santa Clara and San Mateo counties — supports Hepp’s point. It found the Bay Area had the lowest loan delinquency rates in the U.S. last  April.

The research suggests property owners with government-backed loans are making mortgage payments in the Bay Area, unlike the rising loan defaults that led to the housing crash of 2007.

Prices are leaping in once relatively affordable East Bay communities, while Silicon Valley techies are bidding $100,000-plus over list prices to buy into Peninsula cities. Low interest rates, hovering around 3% for a standard mortgage, have allowed buyers to expand their budgets.

The burst in Bay Area home prices was led by Contra Costa County, up nearly 25% from the previous year to $972,000, Alameda County, up 17% to $1.18 million, and Santa Clara County, up 11.5% to $1.52 million, according to CoreLogic data. The year-over-year median price rose 8.5% in San Mateo County to $1.75 million and climbed 2.9% in San Francisco to $1.79 million.

The median prices grew 28% from April 2020 — a low water mark for real estate, with few sales closing in the initial lockdown of COVID-19 restrictions.

Sales of all homes, including condos and new and existing houses, rose 15% from March to April. The number of transactions more than doubled from the previous April.

Hepp said some of the intense demand is driven by buyers’ fear: “I won’t be able to get in unless I get in now.”

Agents and real estate professionals say the market has accelerated to peak levels last seen in 2018. Desirable homes are drawing multiple offers the day they hit the market.

In  Alameda and Contra Costa counties, the average number of days on the market dropped from 25 to 13 between January and May. “The price increases in the East Bay are breathtaking,” said David Stark of the Bay East Realtors Association.

Michelle Ronco of MLSListings said home inventory has started to increase but not enough to keep up with demand. In Cupertino and Saratoga, for example, homes are being listed and sold the same day. “What’s coming on is coming right off,” Ronco said. “It’s just basic supply and demand.”

The common Silicon Valley trend of homes selling for a premium above their listing prices has spread to Santa Cruz and Monterey counties, as well as Hollister, she said. Those regions have all hit record home prices in recent months, according to MLSListings data.

Cupertino agent Ramesh Rao said professional couples continue to bid up single-family homes near tech offices on the Peninsula. He cautions clients they may need to bring more money to clinch a deal, as prices have sometimes jumped $250,000 or more over listings.

One of Rao’s clients, a tech couple in their 30s, came into their search with an initial budget of $1.3 million for a single-family home with a nice yard in San Jose. They were told to expect to stretch their finances — and eventually won a bidding war with a $1.75 million offer for a spacious 4-bedroom with a collection of fruit trees in the back yard.

Rao said demand for space remains strong even as pandemic restrictions have loosened. “Which buyer ever said, ‘I want a small house?’ “They always want a bigger house,” he said.

The market has been a challenge for many buyers, said Pleasanton agent Tina Hand. She’s had to help clients adjust to the fast pace and inflation in the East Bay. “A list price is just a number. The appraisal price is really just a number,” Hand counsels new buyers. “What are you really willing to pay?”

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