Real Estate Roundup: Bay Area Housing Bubble Unlikely to Burst, Economist Says

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

STRONG ECONOMY SHOULD CONTINUE TO PUSH UP BAY AREA HOME PRICES
Bay Area home prices are already out of reach for many residents, and that appears unlikely to change barring an unforeseen economic catastrophe.

That’s according to National Association of Realtors’ Chief Economist Lawrence Yun, who spoke last week at the 27th Annual Convention and Expo of the Santa Clara County Association of Realtors. As The Mercury News reports, Yun told attendees that the Bay Area will probably not see a housing meltdown due to intense demand driven by plentiful jobs and exceptionally slim inventory conditions.

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Pacific Union Quarterly Report: Q3 2017

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For the most part, home prices rose and inventory declined in the third quarter from one year earlier throughout the Bay Area and in the Lake Tahoe/Truckee region. Only our Sonoma County and Sonoma Valley regions saw supply conditions improve from the third quarter of 2016. San Francisco and the Mid-Peninsula experienced the region’s biggest annual inventory declines, with the number of homes for sale down by double-digit percentage points.

Below, Pacific Union Chief Economist Selma Hepp offers a brief synopsis of third-quarter real estate activity in each of Pacific Union’s regions. The accompanying links lead to the full report for each area, where you can access the latest regional and community-specific market data and statistics to help you make a better, more informed homebuying or selling decision.

Marin County

Marin County homebuyers remained enthusiastic in the third quarter, continuing the streak of healthy home sales activity that began earlier in the year. Marin County saw the second-strongest increase in home sales in the Bay Area this year, driven by strong demand for homes priced between $2 million and $3 million.

At the same time, third-quarter inventory was lower than during the same period a last year, leading to heightened competition among buyers. Bidding wars remained common, and almost half of homes sold over the asking price, a notable increase from the same period last year.

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Rising From the Ashes: How Will the Wine Country Wildfires Affect Its Housing Markets?

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Executive Summary:

  • The Wine Country wildfires are estimated to have destroyed about 2,800 homes so far, or about 5 percent of Santa Rosa’s housing stock.
  • The current property damage approaches $4 billion.
  • With rents and home prices already growing robustly, there will be further pressure on prices given the region’s already tight inventory.
  • City and county building permit processes will be key to the Wine Country’s recovery.
  • An attitude of optimism anticipates the rebuilding process.

Unfortunately, wildfires are a harsh reality of living in California, especially during the month of October. Thousands of fires burn throughout the state every year, but October seems to be the deadliest. Historically, six of California’s seven most destructive wildfires have happened in October.

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Moderate California, Bay Area Home Price Gains Forecast for 2018

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  • The California Association of Realtors’ 2018 forecast calls for 4.2 percent single-family home price appreciation next year.
  • Affordability is expected to further diminish, with only about one-quarter of California households able to afford the median-priced home by the end of 2018.
  • The state’s unemployment rate will fall to 4.6 percent, while mortgage rates will rise to 4.3 percent.

California home price appreciation should slow next year, although there appears to be no end in sight for the state’s severe and prolonged inventory shortage.

That’s according to the California Association of Realtors’ 2018 housing market forecast, which says that the median sales price for an existing single-family home in the state should close out 2017 at $538,500, up 7.2 percent year over year. CAR predicts that appreciation will slow to 4.2 percent in 2018, putting the median price at $561,000 by the end of next year.

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Please Donate to Pacific Union’s Wine Country Relief Fund

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All of us at Pacific Union would like to extend our heartfelt condolences to everyone affected by the wildfires that have devastated Napa and Sonoma counties this week. To help our colleagues in the North Bay get back on their feet, we have established the Pacific Union Wine Country Relief Fund.

Please consider making a donation to the relief effort via this PayPal link. You can also mail physical checks, with a memo of Wine Country Relief Fund, to:

Pacific Union

3333 Mendocino Ave., #220

Santa Rosa, California

95403

Your donation will be distributed to our Pacific Union families who need our support for shelter, food, and basics for rebuilding their lives. Thank you in advance for any contributions you can make — every donation, large or small, is much appreciated.

Bay Area Housing Activity Slows in September but More Competition for Homes

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Executive Summary:

  • While September home sales in the Bay Area declined year over year, the region saw strong summer activity that outperformed last summer, bringing overall sales this year 2 percent ahead of last year.
  • While all eight Bay Area counties (excluding Solano) posted year-over-year declines in September sales, San Francisco and Napa saw activity cool the most, with San Francisco sales stifled by shrinking inventory and Napa continuing this year’s trend of slower sales.
  • A lack of affordable homes is the main culprit in fewer sales, as sales of homes priced above $1 million jumped in September.
  • Buyer frenzy also intensified for homes priced higher than $1 million, leading to greater competition and increased premiums.
  • In September, 68 percent of Bay Area homes priced between $1 million and $2 million sold over the asking price, up from 53 percent last September, with competition highest in San Francisco and Silicon Valley.
  • Based on Pacific Union transaction data, almost 50 percent of San Francisco and Silicon Valley buyers of homes priced below $2 million are first-time buyers, with 39 percent and 38 percent of buyers under the age of 35 in San Francisco and Silicon Valley, respectively.

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Bay Area Buyers Make the Nation’s Largest Down Payments

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  • Homebuyers in the San Jose and San Francisco metro areas placed the largest down payments in the second quarter, a respective 25.2 percent and 22.3 percent.
  • Nearly one-quarter of U.S. home purchase-loan originations involved a nonmarried co-borrower.
  • More than half of buyers with a mortgage in San Jose had a co-borrower, the largest amount in the country.

The Bay Area’s prolonged inventory drought has created an exceptionally competitive housing market, with the average property receiving anywhere from two to four offers and six in 10 homes selling for more than asking price. To successfully close a sale, local buyers are putting down much larger down payments than the national average, and a substantial number are leveraging co-borrowers to help them qualify for the mortgage.

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Pacific Union’s August 2017 Real Estate Update

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MARIN COUNTY

The median sales price in Marin County was $1,215,000 in August, just a few thousand dollars higher than in July. Inventory was also nearly unchanged from the previous month, with a 1.4-month supply.

Homes sold in an average of 50 days and for 97.9 percent of original prices.

Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the adjoining chart includes single-family homes in these communities.

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San Francisco’s Annual Wage Growth Is Among the Nation’s Highest

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  • The average employee in the San Francisco metro area earned more than $68,000 per year as of August, an annual gain of 2.4 percent.
  • The energy and utilities industry is San Francisco’s highest-paying sector, with an annual median base salary of more than $75,000.
  • Job openings have increased by 20.1 percent in San Francisco since August 2016, and the region’s unemployment rate is at 3.6 percent.

On the heels of a report that explains how paychecks stretch further in San Francisco than they do in other coastal job centers comes more promising economic news: Wages here are growing faster than in other major U.S. metropolitan areas.

Glassdoor’s newly released Local Pay Reports say that the annual median base pay in the San Francisco metro area was $68,164 as of August, a year-over-year gain of 2.4 percent. The region has the largest salary of any of the 10 major U.S. metro areas that Glassdoor tracks and ties Boston for the highest annual growth.

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Real Estate Roundup: More Home Price Growth Forecast for the Fall

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

SUPPLY CONSTRAINTS SHOULD CONTINUE TO FUEL HOME PRICES
The U.S. housing market is on pace to have its best year for sales in a decade, and there may be no end in sight to price appreciation given the current inventory situation.

A Freddie Mac blog post says that there were 5.4 million U.S. home sales on a seasonally adjusted annual rate as of July, with existing home sales up 2.1 percent year over year and new home sales up 0.9 percent from last July. The company says that it expects demand for housing to remain high this fall, thanks to mortgage rates that are at the lowest level since last fall and solid job growth.

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