“Drum-tight inventory, lower (interest) rates than most people alive have ever seen, and in some areas record levels of investor purchases (created) an unusual environment,” said Andrew LePage, analyst at San Diego’s DataQuick, which produced the report.

Another big factor – “unleashing of pent-up (buyer) demand,” he said. During the downturn, “for years, some people sat on the sidelines, afraid to buy. Now there’s been a shift in psychology in the past year with people switching from fearing prices might fall more, to fearing they will go up, so they want to buy now.”

An improving economy and job growth – factors that are stronger here than elsewhere in the country – also feed buyer demand.

“The San Francisco Bay Area is the hottest market in the country right now,” said Errol Samuelson, president of Realtor.com, the online marketplace for the National Association of Realtors.

February’s sales median for the nine-county region was $405,000, compared with $325,000 in February 2012. It was the fourth straight month in which prices rose more than 20 percent compared with the prior year, and the ninth consecutive month of double-digit increases, DataQuick said.

The same dearth of inventory that amped up prices caused the volume of sales to slump 6.1 percent compared with a year earlier. A total of 5,404 new and resale homes and condos changed hands in the region in February, DataQuick said.

Return of bidding wars

Realtors around the area report that tight inventories are spurring ferocious bidding wars over properties – a phenomenon that holds true at all price points.

In Berkeley, John and Judith Ratcliffe of the Grubb Co. sold three homes in recent weeks that listed for more than $1 million and went for substantial amounts above asking. One architecturally distinctive home was listed at $1.295 million but sold for $1.8 million, all cash – more than half a million dollars, or 39 percent, above the asking price.

“Everything in our market is getting multiple offers,” Judith Ratcliffe said. “We need more inventory.”

At a different point on the scale, Annie Brown, an agent with ZipRealty in the East Bay, recently took an investor client to tour a $399,000 four-bedroom tract home in Dublin.

“We drove up and saw all these people in a line,” she said. “I was thinking, ‘What the hey?’ and then I realized it was to get in this particular house. It’s human nature; if people think they can’t get something, they want it more. We stood in line for over an hour to get in.”

Her client offered $92,000 over asking and lost out to another investor who bid $100,000 more than the list price, she said. There were 40 offers.

“It’s an investor’s market right now,” Brown said. “Our first-time home buyers … are having a really hard time getting an offer accepted. It’s hard for them to compete with investors.”

Absentee buyers

Indeed, investors continued to be powerful forces in the market. Absentee buyers accounted for an all-time high of 28.2 percent of February sales, DataQuick said. All-cash buyers also hit a record, representing 31.9 percent of February sales. Historically, cash transactions have been about 12.9 percent of sales.

Realtor.com data show that listings here are being snapped up much more quickly than elsewhere in the nation. In Alameda County, for instance, listings go into escrow on average within 14 days of hitting the market. Nationwide, it takes 98 days for houses to sell.

Around the Bay Area, inventories of for-sale homes are about half what they were a year ago, Realtor.com shows. By contrast, nationwide, inventories are down about 16 percent compared with last year, Samuelson said.

That’s true in many micro-markets as well. Take San Francisco’s Nob Hill, for instance. A year ago, it had 30 homes for sale. Now it has just 15, according to Redfin.

Kiesha Stephens, a listing specialist with Redfin, is preparing a two-bedroom Nob Hill condo – a remodeled unit that retains its early 1900s character, including stained glass windows, wood wainscoting and two fireplaces – to hit the market next week for $799,000, a relative bargain in that neighborhood.

She’s already had six agents ask if they could make pre-emptive offers.

“There’s so little inventory that things are definitely skewed in sellers’ favor,” she said. “Right now there seems to be a surge of buyers.”

Fewer distress sales

DataQuick said that changes in the market mix, such as fewer bargain-priced distress sales and more high-end homes, account for about half of the median’s increase. In other words, all Bay Area home values did not jump 25 percent in February, although values definitely are rising across the board. Distress sales – foreclosures and short sales, both often sold at a discount – are still above their historic norms but are declining.

About a third of February’s existing-home sales were distressed; a year ago more than half (53.4 percent) were foreclosures or short sales, DataQuick said. Just 13.6 percent of resales were foreclosures in February, the lowest level since November 2007.

At their peak in February 2009, foreclosures accounted for 52 percent of all resales. Short sales also declined, but not as much. They were 21.4 percent of resales, versus 27.0 percent a year ago.

The number of homes selling for more than $500,000 rose 27.7 percent compared with last year, while those less than $500,000 fell 14.4 percent, DataQuick said.

Prices, which went into free fall during the downturn, are still far off their peaks. The Bay Area median reached a high of $665,000 in summer 2007 and a low of $290,000 in March 2009. DataQuick said that if the current rate of increase holds up, the Bay Area prices will be halfway back to their peak this spring or summer.

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com Twitter: @csaid

Article source: http://www.sfgate.com/realestate/article/Bay-Area-home-prices-up-24-6-over-2012-4356658.php

Investors have been rushing to buy distressed properties, seeking to take advantage of today’s hot rental market, but those inventories have been declining precipitously, especially in some of the hardest hit markets, like Phoenix and parts of California. So much of the recent sales activity has been on the low end, so a drop in this supply really shows just how dependent this market is on distressed sales.

“Any bank-owned properties that have been held back in markets with inventory shortages should be released expeditiously to help meet market demand,” Yun said. “Housing starts will likely need to double over the next two years to satisfy the pent-up demand for both rentals and ownership.”

While most investor purchases are all-cash, the mortgage market continues to plague home sales, as banks are overwhelmed with refinance applications and are therefore taking longer to process all mortgage applications. Despite a nearly 6 percent jump in the pending home sales index in May, existing home sales fell 5.4 percent in June. New home sales, which are measured by signed contracts, not closings, fell 8.4 percent compared to the previous month.

The Realtors note that there is buyer interest out there, but sellers are still reluctant to list their homes. This despite new evidence that home prices have stabilized in many of the nation’s markets. Lackluster job growth and negative equity continue to keep many potential buyers on the sidelines. Mortgage rates are at record lows, but home purchase applications have been flat over the past month, according to the Mortgage Bankers Association.

Regionally the Pending Home Sales Index in the Northeast fell 7.6 percent from May but is 12.2 percent higher than a year ago. In the Midwest the index slipped 0.4 percent but is 17.3 percent above June 2011. Pending home sales in the South declined 2.0 percent but are 8.8 percent above a year earlier. In the West the index rose 2.6 percent from May and is 3.0 percent higher than June 2011.

• Million-Dollar Homes
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• Home Sales Disappoint Twice
• Home Price Bottom or Bubble?

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