Bay Area housing market shifting in anticipation of IPO demand

Bay Area housing market shifting in anticipation of IPO demand

Executive Summary:

  • IPO expectations are already showing up in home sales activity, particularly in San Francisco and San Mateo 

  • Sales of homes in San Francisco, San Mateo and Alameda have solidly exceeded last year – up 7 percent, 4 percent and 2 percent respectively year-over-year in April

  • Santa Clara, Wine Country and Contra Costa remain slower compared to last year

  • Homes priced between $1 million and $2 million continue to struggle, except in San Francisco and San Mateo, likely a result of tax reform changes and reduced state and local tax (SALT) and mortgage interest deductions

  • Nevertheless, sales of homes priced above $3 million have surged again, posting a 5 percent year-over-year increase, matching last year’s peaks 

  • While growth in inventory of homes for sales is broad based, availability of homes priced above $3 million accelerated again to a 26 percent annual growth in April

  • While price growth remains flat in most regions, San Francisco median prices up 2 percent year-over-year in April

  • A 9 percent annual increase in homes under contract suggests buyers are back in droves, especially for homes priced over $3 million, up 44 percent year-over-year

April U.S. Jobs Report: Are we in a Goldilocks Economy?

April U.S. Jobs Report: Are we in a Goldilocks Economy?

A Goldilocks Economy is an economy that is neither too hot or cold, in other words, it sustains moderate economic growth and has low inflation, which allows a market-friendly monetary policy.

·      Today’s national employment report from the U.S. Bureau of Labor Statistics once again outpaced expectations by posting a 263,000 increase in jobs added in April. The strong gain adds to the upward revisions of the two previous months, bringing the year-to-date monthly average to 205,000 jobs added, only slightly below the 223,000-monthly average in 2018.

Silicon Valley Market Overview

From Compass Chief Economist Selma Hepp – April 12, 2019

Silicon Valley continued to see relatively muted housing market activity in the first quarter, especially when compared to last year’s uncharacteristically dynamic conditions. Nevertheless, while total number of homes sold declined, winter’s build-up in affordably priced inventories in Santa Clara County helped push sales of those homes above last year’s levels. Largest decline in home sales activity was among homes priced above $3 million. 

At the same time, while Silicon Valley continued with inventory decreases, the remainder of Santa Clara County experienced relatively larger increases in the number of homes for sale compared to other Bay Area regions, and the increases were widespread across price ranges. 

Buyers remained restrained and less likely to engage in bidding wars than in previous years. However, improved home buying conditions and lower mortgage rates brought back some enthusiasm leading to a bounce back in the share of homes selling over asking price. About 50 percent of homes sold over asking price at the end of the quarter. 

Declines in sales of higher priced homes, coupled with buyer restraint, led to a decline in median home prices on a year-over-year basis. However, median prices are still in line with levels prior to last year’s extraordinary jump in prices, averaging almost 30 percent at times. 

Looking Forward: With improvement in buying conditions such as lower mortgage rates, more inventory, lower median prices, buyers are facing great opportunities this spring. Renewed interest is also evident in improved home buyer sentiment in March. 

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the charts includes all single-family homes in these communities.

Real Estate Roundup: San Francisco Is One of America’s Best Cities for Telecommuters

Real Estate Roundup: San Francisco Is One of America’s Best Cities for Telecommuters

SAN FRANCISCO NAMED ONE OF THE NATION’S TOP CITIES FOR WORKING FROM HOME
San Francisco is not only an excellent city for finding a job, it’s also one of the best in the country for workers who want the flexibility of telecommuting.

That’s according to a new study by SmartAsset, which ranks the top 25 American cities for telecommuters on a 100-point scale. The company’s gauges a city’s telecommute-friendliness based on the percentage of employees working from home and its change over the past five years, unemployment and poverty rates, housing costs, and number of coffee shops and bars.

U.S., Golden State Home Price Growth Is Expected to Slow in 2019

U.S., Golden State Home Price Growth Is Expected to Slow in 2019


U.S. home prices are expected to increase by 4.8 percent year over year by November 2019.

  1. November home prices were up on an annual basis in the San Francisco and Los Angeles metropolitan areas by a respective 5.9 percent and 5.3 percent. 

  2. Prices appreciation for new homes is projected to slow in 2019 in all four major Bay Area housing markets, while new-home prices in Los Angeles are forecast to begin depreciating.

Bay Area Housing Inventory Again Posted a Solid Increase in November

Bay Area Housing Inventory Again Posted a Solid Increase in November

The rebalancing of Bay Area housing markets that started several months ago continued in November, with buyers taking a notable pause. However, with extra inventory on the market — especially in the more affordable price range — cooling competition, and more price reductions, buyers are seeing more opportunities heading into 2019.

Overall Bay Area home sales declined by 17 percent in November, with all counties and price ranges posting drops from the same time last year. Table 1 summarizes November year-over-year changes in home sales by price range and county. While sales were generally down, a few bright spots remain in Alameda County’s $1-million-to-$2-million range and in both East Bay counties for sales over $3 million. There were about 940 fewer Bay Area home sales compared with last November, with more than 70 percent of the decrease for homes priced below $1 million.

Real Estate Roundup: California Again Leads the Nation for Home-Equity Gains

Real Estate Roundup: California Again Leads the Nation for Home-Equity Gains

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

GOLDEN STATE HOMEOWNERS GAIN THREE TIMES MORE EQUITY THAN THE U.S. AVERAGE
Although U.S. homeowners saw their home-equity gains moderate in the third quarter due to cooling price growth, California remains at the top of the heap, with owners pulling in about three times the national average.

A new CoreLogic report says that the average American homeowner gained $12,400 in equity year over year in the third quarter, down by $3,600 from the second quarter. Golden State owners enjoyed the largest annual equity increase in the U.S., making an average of nearly $37,000 from the third quarter of 2017.

Shopping for a California Home? Here’s How Long It Might Take.

Shopping for a California Home? Here’s How Long It Might Take.

Golden State residents who aspire to homeownership should expect to search for at least two months, while house hunters in the Bay Area will likely be looking for even longer.

The average California homebuyer spends an average of eight weeks to find a suitable home according to a report released last week by the state Association of Realtors, with almost one-third shopping for more than three months. Though Golden State inventory improved for the seventh consecutive month in October, supply remains tight, and serious buyers are waiting out the market to amass a down payment, with most using their personal savings to fund the biggest purchase of their lives.

Silicon Valley Projected to Post the Nation’s Largest Inventory Gain in 2019

Silicon Valley Projected to Post the Nation’s Largest Inventory Gain in 2019

·      Nationwide, the number of homes for sale is forecast to increase by less than 7 percent by the end of next year, while the San Jose metropolitan should see a double-digit-percent gain.

·      Home price appreciation in all major California metro areas is projected to outstrip the national average of 2.2 percent.

·      Mortgage rate increases will drive up the average monthly payment by 8 percent in 2019.

California Boasts 80 Percent of the Nation’s Most Expensive ZIP Codes in 2018


·     San Mateo County’s Atherton ranks as America’s priciest ZIP code this year, with a median sales price of $6,700,000.

·     Santa Monica, Palo Alto, Los Altos, and Portola Valley rank among the nation’s 10 most expensive real estate markets.

·     San Francisco ties New York for the highest concentration of high-end U.S. housing markets on a city level, while Los Angeles has the most on a county level.

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The Golden State is home to the lion’s share of America’s priciest housing markets, with an exclusive Silicon Valley community at the top of the list.

An analysis by PropertyShark ranks the country’s 100 most expensive ZIP codes based on the median sales price in 2018. Eighty-two of those communities can be found in California, largely in the Bay Area and Los Angeles and Orange counties.

With a median sales price of $6,700,000, Atherton‘s 94027 is the country’s priciest community. Also recognized at America’s most expensive ZIP code by Forbes in late 2017, Atherton’s median sales price is up by 35 percent year over year. According to MLS data, the most expensive single-family home sold in the highly affluent San Mateo County community in 2018 was a six-bedroom, 10,500-plus-square foot mansion that found a buyer in late June.

Santa Monica‘s 90402 ZIP codes takes the No. 5 spot, with a median sales price of $3,762,000.  America’s top 10 most expensive real estate markets include four of the usual suspects in Silicon Valley: Palo Alto‘s 94301 ($3,755,000), Los Altos’ 94022 ($3,500,000) and 94024 ($3,254,000), and Portola Valley’s 94028 ($3,300,000). PropertyShark notes that 30 Silicon Valley communities rank among the 100 priciest communities, the highest such concentration in America.

While San Francisco doesn’t appear on the list until No. 40, it places nine neighborhoods in the rankings, tied with New York for the most of any U.S. city. The 94123 ZIP code — which includes the Marina and Cow Hollow — is San Francisco’s most expensive real estate market, with a 2018 median sales price of $2,075,000.

On a county level, Los Angeles has America’s most expensive ZIP codes, with 19 included in the list. Los Angeles County’s priciest communities include those in Beverly Hills, Pacific Palisades, Manhattan Beach, San Marino, and the city proper.

Santa Clara County has the country’s second highest concentration of big-ticket real estate markets at 17 ZIP codes  Besides the aforementioned four enclaves, Santa Clara County housing markets  that made the list are found in Saratoga, Los Gatos, Cupertino, Sunnyvale, Mountain View, and San Jose.








Pacific Union Joins Compass

Pacific Union Joins Compass

Pacific Union is pleased to share the news that our firm has joined Compass, a real estate technology company that operates in more than 30 regions throughout the U.S.

REAL Trends currently ranks Pacific Union as the No. 5 residential real estate brokerage in Americaand the No. 1 independent brokerage in California based on 2017 sales volume of $14.1 billion. With the addition of Pacific Union, Compass’ national team will grow to over 6,400 real estate professionals representing $28 billion in sales volume in 2017.

Pacific Union was founded in 1975 and acquired by CEO Mark A. McLaughlin in 2009. The San Francisco-based brokerage has more than 50 offices and nearly 1,700 real estate professionals throughout California. Pacific Union’s deep commitment to professionalism and client service make it an ideal strategic and cultural fit for Compass.

Real Estate Roundup: Silicon Valley Claims America’s Two Most Expensive Housing Markets

Real Estate Roundup: Silicon Valley Claims America’s Two Most Expensive Housing Markets

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

ATHERTON AND LOS ALTOS TOP LIST OF THE NATION’S PRICIEST COMMUNITIES
Yet another report highlights Silicon Valley‘s massive wealth, with two of the region’s housing markets ranking as the most expensive in the country.

That’s according to a video produced by realtor.com, which call out the country’s five highest-dollar housing market based on median list price, with Atherton at the top of the list. The San Mateo County town’s median list price over the past year was $10,194,000, the highest in the nation. The video notes that buyers in Atherton are often in search of large properties, with many homes in the community larger than 8,000 square feet.

Los Altos ranks No. 2 in America, with a median list price of $6,326,000. While homes in Los Altos may not be as sizable as those in Atherton, realtor.com assures viewers that residents of the Santa Clara County city have plenty of money at their disposal.

Bay Area Posts Double-Digit Percent Home Price Gains for the 13th Straight Month in July

Bay Area Posts Double-Digit Percent Home Price Gains for the 13th Straight Month in July

The median sales price for a single-family home in California was $591,460 in July, down from June’s all-time high but up by nearly 8 percent year over year.

  • The nine-county Bay Area ended July with the median sales price at $980,000, an annual increase of more than 10 percent.

  • Diminishing affordability in job centers helped drive double-digit percent year-over-year increases in sales activity in Contra Costa, Alameda, and Napa counties. 

Finally, More Bay Area Housing Inventory Arrives After 16 Months of Declines

Finally, More Bay Area Housing Inventory Arrives After 16 Months of Declines

Executive Summary:

  • The Bay Area’s decline in home sales (including single-family and condominiums) improved in July, with only 3 percent less activity year over year after a 13 percent decline in June.

    • Compared with last summer (May through July), sales were slower in Santa Clara, Napa, Sonoma, Marin, and San Mateo counties.

    • Sales activity declined by 19 percent in Marin County and by 13 percent in Santa Clara County.

    • Sales of homes priced above $1 million — and especially those above $3 million — continued to fare better than they did last year.

    • Only Marin County saw a decline in sales of homes priced between $2 million and $3 million, down by 7 percent year over year.

  • Inventory finally improved, up by 2 percent, after 16 consecutive months of year-over-year declines.

    • Most Bay Area counties saw inventory improve in July.

    • Inventory above $1 million increased by 17 percent, mostly driven by more homes for sale in Santa Clara and San Mateo counties.

    • Only Sonoma and Napa counties gained inventory below $1 million, up by 17 percent and by 5 percent respectively

    • In contrast, San Francisco still lost inventory across all price ranges in July, declining by 14 percent. Contra Costa County saw inventory drop by 5 percent from July 2017.

Where Will Mortgage Rates Land?

Where Will Mortgage Rates Land?

Thirty-year, fixed-rate mortgages in 2018 have been rising at the fastest pace in 50 years and reached 4.66 percent for the week ended May 24 before dropping to 4.56 percent this week.

  • However, mortgage rates did not increase proportionally to the federal funds rate determined by the Federal Reserve because they are determined by longer-term economic factors beyond solely the influence of central banks and monetary policy.

  • Some Fed officials and economists believe that long-term structural factors — such as changes in demographics, a slowdown in productivity growth, and heightened demand for safe assets — will continue to keep the 10-year U.S. Treasuries, a proxy for U.S. fixed-rate mortgage rates, low going forward.

  • According to the Federal Reserve of San Francisco, the new normal for the natural rate of interest is around 2.5 percent, 2 percentage points below the long-term average, which puts mortgages rates at about 5 percent or slightly higher over time.

  • Shorter term, through the end of 2018, 30-year fixed rate mortgages are still expected to reach no more than 4.7 percent.

  • The Federal Open Market Committee has signaled that it would increase the federal funds rate at its June meetings. Markets have most likely already priced in the hike.

  • Some Fed officials urge caution in how fast it continues raising rates because of inflation expectations, the neutral policy rate, the flattening yield curve, room to grow business investment, and labor markets.

  • There are concerns that if the rate hikes are too aggressive, they could tip the U.S. economy into recession.

Real Estate Roundup: Bay Area Homeowners Begin 2018 as the Nation’s Most Equity-Rich

Real Estate Roundup: Bay Area Homeowners Begin 2018 as the Nation’s Most Equity-Rich

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

SAN JOSE, SAN FRANCISCO CONTINUE TO HAVE THE NATION’S MOST EQUITY-RICH HOMEOWNERS
As Pacific Union published in its first-quarter 2018 real estate report, single-family home prices in San Francisco and Silicon Valley posted substantial annual home price gains — 25.5 percent and 19.5 percent, respectively. And that type of appreciation means that the Bay Area’s two largest cities remain those with the most equity-rich homeowners in the country.

Real Estate Roundup: California Housing Markets Are No Longer on Top of the Nation’s Hot List

Real Estate Roundup: California Housing Markets Are No Longer on Top of the Nation’s Hot List

SAN FRANCISCO LOSES ITS STATUS AS HOTTEST U.S. REAL ESTATE MARKET IN APRIL
For the past couple of years, California cities have dominated realtor.com’s monthly list of the nation’s 20 hottest real estate markets, with San Francisco, San Jose, and Vallejo trading off the No. 1 spot. But that situation has changed as April ends, with a West Texas city claiming the title of America’s most in-demand housing market.

Realtor.com measures a real estate market’s heat level by the most listing views on its website and fastest pace of sales, and by those criteria, Midland, Texas is the nation’s hottest housing market in April. San Francisco, which had held the No. 1 position for the first three months of this year — as well as multiple months over the past few years — fell to No. 3.

The Next Three Months Are the Best Time to Sell a Home in California

The Next Three Months Are the Best Time to Sell a Home in California

Nationwide, May is the best month to sell a home for more than its value, with sellers receiving average premiums of 5.9 percent between 2011 and 2017.

  • In 85 percent of California markets, May, June, and July are the top months to sell a home.

  • April and May are the best months for sellers in the Bay Area, while Southern California sellers have the greatest chances of receiving premiums in June.

California homeowners who are considering selling increase their chances of receiving premiums if they put their properties on the market between May and July.

Millennial Homebuyer Activity Climbs to Record High

  • For the fifth straight year, millennials are the most active U.S. homebuyers, accounting for 36 percent of sales.
  • More than half of millennials bought a home in a suburban community, and 85 percent opted for a single-family structure.
  • Nearly half of millennials carry student loans, with a median debt of $27,000.

Millennials remain the most active U.S. homebuyers, though tight inventory conditions, strong price growth, student debt, and higher costs of living remain challenges to ownership for that generation.

The National Association of Realtors’ annual 2018 Home Buyer and Seller Generational Trendsstudy says that millennials accounted for 36 percent of purchases over the past year, a slight uptick from the previous survey and an all-time high. Defined as Americans under the age of 37, millennials have been the most active group of U.S. homebuyers for five straight years.

Millennial homebuyer activity in Bay Area job centers mirrors the national trend. According to a February analysis of Pacific Union data by Chief Economist Selma Hepp, buyers under the age of 35 accounted for 37 percent of transactions in San Francisco between August 2017 and January 2018, while millennials were responsible for 35 percent of purchases in Silicon Valley.

As millennials increasingly start families, they are gravitating toward more affordable suburban communities, which allow them to purchase larger homes. Fifty-two percent of millennials chose a home in the suburbs, and 85 percent of them bought single-family homes. Only 15 percent of millennials bought homes in urban areas, while an even smaller number (2 percent) opted for a condominium.

“While there is an overall trend among households young and old to migrate towards urban areas, the very low production of new condos means there are few affordable options for buyers – especially millennials,” NAR Chief Economist Lawrence Yun said.

Besides a lack of affordable starter homes, millennials must grapple with rising home prices and student-loan debt. NAR found that almost half of millennials are paying off student debt and carrying a median amount of $27,000. About one-quarter of Americans under the age of 37 said that saving for a down payment was the most difficult part of the homebuying process, and of those, 53 percent said that student loans delayed the savings process.

Millennials also face higher living costs than the generation before them, while wage growth for the demographic has been stagnant. According to a Freddie Mac analysis, between 2000 and 2016, young Americans’ expenditures increased by 36 percent. During that time period, home prices grew by 29 percent, while millennial per-capita incomes inched up by 1 percent.

A final finding from NAR’s report: When millennials are ready to purchase a home, 90 percent of them employ the services of a real estate professional, with help understanding the process cited as the primary benefit.

Risk of Bubble for California, Bay Area Housing Markets Is Minimal, Report Says

  • Analysts at Arch MI do not believe that home prices are overvalued, nor do they foresee a looming bubble.
  • The chances of home prices declining in California over the next two years is 3 percent, making it a minimal-risk market.
  • All 12 California metropolitan areas that the report tracks have minimal risk of price depreciation by the end of the decade.

Although home prices should continue to increase for the rest of the decade, a bubble does not appear imminent nationwide, in California, or in the Bay Area.

That’s according to Arch MI’s latest Housing and Mortgage Market Review report, in which company analysts wrote “Home prices in the U.S. currently do not appear to be overvalued based on the historical relationship between home prices and incomes.” Before the housing crisis, U.S. home prices were 22 percent overvalued, then fell to levels that were 12 percent undervalued in 2012. Currently, Arch MI estimates that home prices are now 10 percent to 15 percent undervalued because of mortgage rates that remain near record lows.

The company does not foresee a housing bubble on the horizon across the U.S. or most cities. Warning signs of a housing-market bust — including too much buyer debt, inferior-quality loans, and overly rapid price appreciation — do not currently exist. The forecast echoes findings from a Freddie Mac report published last fall that also downplayed the possibility of another bubble.

Using data from the third quarter of last year, Arch MI’s Risk Index puts only three states at moderate risk for price deprecation by the end of 2019: Alaska, North Dakota, and Wyoming. California is one of 41 states that the company’s metric rates as minimal risk, with just a 3 percent chance of prices falling over the next two years. Golden State home prices increased by 7.9 percent year over year in the third quarter of 2017.

All 12 twelve California metropolitan areas for which Arch MI estimates risk are rated as minimal. The chances of price deceleration in San Jose, Oakland, and Los Angeles is 2 percent, while the likelihood of a decline in San Francisco is 3 percent. Year over year, third-quarter home prices grew by 8.5 percent in Oakland and Los Angeles, 6.8 percent in San Jose, and 6.4 percent in San Francisco.

Nationwide, the company expects home price appreciation of 2 percent to 6 percent over the next couple of years due to buyer demand that will continue to exceed tight supply conditions. Strong job growth and the aforementioned low mortgage rates should also fuel price gains.

Other housing predictions found in Arch MI’s report: the recent tax changes will impact high-priced markets like California the most; affordability will continue to deteriorate due to rising interest rates and home prices; and fewer homeowners will decide to move.