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There’s new hope on the horizon for harried renters struggling to afford the Bay Area’s astronomical prices — rents have started falling.

Median rents dropped in September and August compared to the year before, reversing an upward trend of more than seven years that has pushed prices into the stratosphere, according to a report released Thursday by online real estate company Zillow.

The decreases weren’t huge — just 0.9 percent in the San Jose area and 0.6 percent in the San Francisco area last month. But one economist says the shift signals a much-needed cooling of the region’s overheated rental market, which has priced even well-paid workers out of the Bay Area and sent them hunting for cheaper homes in the Central Valley and beyond.

“This is obviously welcome news for renters in the Bay Area who have seen rents rise very quickly over the past half decade,” said Zillow senior economist Aaron Terrazas. “But it’s also very important to keep it in context.”

In the San Jose area, last month’s drop means tenants are saving about $30 a month compared to the year before, he said. In the San Francisco area, it’s just $20.

And rents remain high. The median rent for apartments, condos, co-ops and single-family homes in the San Jose metro area, which includes Santa Clara and San Benito counties, was $3,499 last month — down from $3,532 the year before, according to Zillow. In the San Francisco area, which includes Alameda, San Mateo and Contra Costa counties, the median rent was $3,399 last month — down from $3,419 the year before.

August marked the first month in seven years that Bay Area rents dropped year-over-year, according to Zillow. Since Zillow began keeping track in November 2010, rents have jumped 46 percent in San Jose and 50 percent in San Francisco.

The recent slowdown comes as the Bay Area’s housing market also is tapping the brakes, with real estate agents reporting homes are taking longer to sell and aren’t fetching quite as much money as they did several months ago.

The cooling trend extends beyond the Bay Area — rents are dropping around the country. Nationally, the median rent dropped 0.2 percent last month compared to the year before.

But while the Bay Area’s rental market slowdown gives tenants hope of a reprieve from punishing prices, it may not be time to celebrate yet, said Nathan Ho, senior director of housing and community development for the Silicon Valley Leadership Group. Ho doesn’t believe prices are falling because of a natural market correction or because cities are building more homes — instead, he credits something more alarming.

“It’s not because we’re finally meeting the demand,” he said. “It’s that folks have gotten so frustrated and fed up with finding an affordable place to live that they’ve moved on.”

People are leaving the Bay Area more quickly than they’re moving in, according to a 2018 report by the Silicon Valley Leadership Group and Silicon Valley Community Foundation. An average of 42 people per month left San Francisco, San Mateo and Santa Clara counties in 2016, the most recent year for which data was available. That’s a dramatic change from the year before, when the region gained an average of 1,962 residents per month.

Many of those fleeing the Bay Area are heading to cheaper cities such as Portland, Austin or even Boise. And every person who leaves is one less tenant to fight over the Bay Area’s limited supply of rental units — which could push prices down.

“This might be the beginning of the tipping point in terms of folks not wanting to deal with the housing crisis anymore,” Ho said.

Terrazas believes the slowdown will continue. While Bay Area rents are unlikely to plummet, the period of skyrocketing rents is over, he said.

“It has been so hot and so fast for so long,” Terrazas said, “that it’s long overdue for a little bit of a normalization.”

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Article source: https://www.mercurynews.com/2018/10/18/bay-area-rents-drop-annually-for-first-time-in-7-years-but-dont-get-too-excited-yet-renters/

The Ashton is a new luxury condominium community located at 400 El Camino Real in Belmont.

BELMONT, CA—After years of recording lagging supply, the Bay Area is possibly beginning to catch up. San Jose had the biggest increase in new listings of the 45 major US metropolitan areas included in a September 2018 realtor.com report. San Francisco also ranks among the five housing markets with the largest September supply gains, with 1,683 current listings.

Article source: https://www.globest.com/2018/10/17/bay-area-housing-finally-posts-gains/

Home sellers have had it easy over the last few years. Housing demand has risen along with the improving economy, and home builders have struggled to build at a pace that keeps up with that demand. The result was a shortage of housing inventory that allowed sellers to sit back and let buyers bid up the price of their home.

But data from the last two months suggests that the housing market is entering a new stage, especially on the West Coast, where home prices have risen beyond most people’s capacity to pay. Instead of bidding wars, houses are sitting on the market longer, and price cuts are becoming more common. Buyers are starting to regain the upper hand.

“If we’re right, nationally, we’ve already entered the early stages of a buyer’s market,” writes Rick Palacios Jr. director of research at John Burns Real Estate Consulting. “Should supply levels cross above five months we’ll be watching for flat [or] possibly declining resale prices in some markets, especially where affordability is already very stretched.”

Housing supply constraints have been a primary factor in driving prices up, but there are signs this is changing. shows that “months of supply”—a leading indicator of housing supply that divides the number of active listings by the pace of sales—has ticked up year-over-year in the last few months after years of declines.

But real estate experts often say there’s no such thing as a national housing market—new homes for sale in New York, for example, don’t mean anything for people who live in San Francisco—and the spikes in supply are most pronounced on the West Coast.

Some of the biggest jumps are in markets that have been red hot over the last 5 years, namely the San Francisco Bay Area, Seattle, and Denver. Active real estate listings in September were up by a whopping 113 percent year-over-year in San Jose, 81 percent in Denver, 47 percent in Seattle, 33 percent in San Francisco, 34 percent in San Diego, and 12 percent in Los Angeles.

But the trend isn’t limited to the largest markets, as smaller cities across California, Colorado, Washington, and Oregon have seen jumps as well. Of the 30 markets that showed the highest spikes in active listings in September, 19 are in those four states.

While the number of active listings has risen, home sales have fallen dramatically across the U.S., as inventory woes and affordability constraints continue to drag down the market as a whole. But as with supply spikes, home sales are falling by double digits in some markets on the West Coast. In September, home sales were down 24 percent year-over-year in Seattle, 16 percent in San Jose, 16 percent in Los Angeles, and 13 percent in San Diego.

The combination of more homes on the market but fewer sales means that despite surging demand for housing, homes are sitting on the market. And given the affordability crisis sweeping across America, especially on the West Coast, this points to only one thing: Home prices have outpaced wages in these markets and people simply can’t afford to buy.

In Southern California, year-over-year home price appreciation began to decline in the spring and has continued to do so into the fall. Northern California was a little later to respond, but San Jose and San Francisco registered their first year-over-year declines in September.

“This is a sign of weakening demand relative to supply, particularly when you see multiple months of decelerating [home price appreciation],” said Daren Blomquist of ATTOM Data Solutions, a real estate data provider. Blomquist noted that data in some of the smaller markets can be volatile from month to month.

Another wild card in this dynamic is rising interest rates, which are once again approaching 5 percent. Rising rates were cited as a possible cause of last week’s stock market selloff, and the housing market is particularly sensitive it. When interest rates rise, monthly mortgage payments go up.

For markets where home prices have already hit their ceiling, rising rates will likely cause home prices to drop just because something will have to give for people to be able to buy a home. Unfortunately for home buyers, the price drop won’t result in lower payments, just that they will pay less on the principal of their mortgage and more on interest.

Regardless of where rates go, though, home prices on the West Coast markets where supply is up and sales are lagging appear to have nowhere to go but down.

Article source: https://www.curbed.com/2018/10/16/17971158/home-prices-west-coast-buyers-market

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Article source: https://www.cnn.com/2018/10/15/tech/san-francisco-workers-tech-boom/index.html

San JoseHigher home prices. Weaker demand. Fewer sales. More traffic.

Economists for the California Association of Realtors on Thursday offered a somber forecast for the state housing market in 2019, expecting rising interest rates and a lack of affordable housing to push more prospective buyers out of the market.

“Home ownership is becoming a luxury good in California,” said CAR chief economist Leslie Appleton-Young. Across the Bay Area, the strong economy coupled with a lack of new housing has led to record prices. “There is no quick fix.”

California continues to be among the least affordable states in the nation for housing. Nationally, about 53 percent of families can afford mortgage payments on a median-priced home in their community. Just 1 in 4 Californians can afford to purchase a home.

In Alameda and Santa Clara counties, only 16 percent of residents can afford the typical home, while 14 percent of residents in San Francisco and San Mateo counties can handle the steep mortgage payments.

The residential market seems to be nearing a peak, Appleton-Young said, although the association expects California home prices to climb 3.1 percent next year. Total sales are expected to dip slightly, despite a growing workforce.

The expectations mean a continued windfall for Bay Area homeowners, while renters and lower-income workers scramble for affordable housing options. The median sale price for the nine-county region peaked in April, with sales of existing homes hitting $935,000, according to CoreLogic.

Median sale prices in the Bay Area have climbed, year-over-year, every month since April 2012. The historic run has given long-time homeowners spectacular returns, while forcing home searchers out of the market and sometimes the region.

As workers move into more affordable, outlying counties, congestion on the roads will increase, said association senior economist Jordan Levine.

He expects the pool of home buyers to dip as many Bay Area residents are priced out of the market. But, he added, “demand is not going to disappear.”

The statewide survey expects continued pressure on the housing market. Interest rates have climbed this year, reaching 4.6 percent last month for a 30-year-fixed rate loan, according to Freddie Mac, adding to monthly costs.

Although the market still favors sellers, economists also see signs it has begun to turn. About 40 percent of recent real estate listings have dropped prices this year, and homes have begun to spend a few more days on the market.

Jeff Barnett, regional manager of Alain Pinel in Los Gatos, said the Santa Clara County market has shown signs of slowing down. The inventory of homes for sale doubled this summer, and the number of homes selling for more than $5 million has increased to a six-month supply, he said.

The market is still historically strong, but Barnett believes its heading back to normal.  “It’s healthy,” he said.

The association also surveyed about 1,500 agents to gauge what’s driving supply and demand. Agents reported sales to international buyers at their lowest levels in a decade. More first-time home buyers are moving outside of their county to find cheaper homes.

The Bay Area has become a petri dish experiment for what happens when jobs, incomes and population grow but housing stock remains flat, Appleton-Young said. The results have been record prices, smashing levels set about a decade ago before the recession.

“Are we at the peak of the cycle?” she asked. “I think we are.”

Citations

https://www.mercurynews.com/2018/06/22/median-price-tag-for-a-bay-area-home-hits-a-record-shattering-935000/

https://www.car.org/

http://www.freddiemac.com/pmms/pmms30.html

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Article source: https://www.mercurynews.com/2018/10/11/real-estate-forecasters-see-cooling-housing-market-in-2019/