Bay Area Sellers Still Scoring Premiums, Bucking Statewide Trend

Multiple-offer situations are fading across most of the Golden State, with sellers netting a smaller percentage of list price than they did a year ago. But here in the Bay Area, a pronounced lack of homes for sale means that overbids are still common.

In its November home sales and price report, the California Association of Realtors estimates that the average home seller in the state currently receives 97.2 percent of list price, down from 98.4 percent one year ago. In the nine-county Bay Area, where homebuyers compete for a limited amount of properties, sellers are pulling in 100.5 percent of list price – the only region in the state where the average buyer could expect to pay a premium.

“The declining sales-to-list price ratio suggests that mismatched expectations of home prices between sellers and buyers still exist in most markets, except for the Bay Area, where there’s a dearth of homes for sale,” 2015 CAR President Chris Kutzkey said in a statement accompanying the report.

CAR’s data shows that the inventory shortages that local buyers have become all too familiar with persisted in November.

The months’ supply of inventory (MSI) in the Bay Area edged up slightly to 2.3 in November on both a monthly and annual basis, but our region has about half as many available homes compared with the entire state. San Mateo had the smallest MSI of any California county, at 1.4, followed by Alameda and Santa Clara (1.9), Contra Costa (2.0), San Francisco (2.3), and Marin (2.7) counties.

Besides fueling overbids, CAR noted that supply constraints have also caused sales volume declines, similar to conclusions reached in a newly released CoreLogic DataQuick report.

“The San Francisco Bay Area, which has an extreme housing supply shortage due to robust economic growth, is a perfect example of how these factors have slowed down home sales this year,” CAR Vice President and Chief Economist Leslie Appleton-Young said.

In November, the number of single-family homes sold in the Bay Area dropped 21.5 percent month over month and 6.3 percent year over year. All nine counties reported double-digit volume declines from October, with seven seeing drops in excess of 20 percent. Sales were down from November 2013 in six of nine local counties.

The median price for a single-family Bay Area home was $748,870 in November, a modest 1.5 percent dip from the preceding month and up 8.1 percent from a year earlier. Marin and San Mateo were the only California counties to post median sales prices higher than $1 million.

San Mateo County was also the fastest-moving market in the state in November, with the average home selling in 21.3 days, as well as the most expensive per square foot, at $654.

(Image: Flickr/Bhautikjoshi)

Mortgage Rates and Home Prices to Rise in 2015, Forecast Says

Both mortgage rates and home prices are projected to rise in the coming year, while continued economic growth should enable more millennials to enter the real estate market, a recent forecast predicts.



“The scenario we’re facing now for 2015 is literally a question of when — not if — mortgage rates are going up,” Realtor.com Chief Economist Jonathan Smoke said in the company’s 2015 Housing Market Trends webinar. “And from the when perspective, I’m betting on the spring.”
As of Dec. 4, 30-year, fixed-rate mortgages averaged 3.89 percent, according to Freddie Mac, an 18-month low. Smoke forecasts mortgage rates to hit 5 percent by the end of 2015, identical to Freddie Mac’s prediction in its own 2015 U.S. Economic and Housing Market Outlook.

The projected hikes could end up costing indecisive homebuyers who delay a purchase a significant amount of money each month, especially if U.S. home prices increase at Realtor.com’s expected rate.
“My most likely outcome, meaning that prices go up 4 percent and mortgage rates are at 5 percent, means that the monthly payment goes up 17 percent,” Smoke said. He explained that mortgage rates vary geographically and that California homebuyers have paid lower-than-average rates over the past 13 years.

Realtor.com also foresees further growth for the U.S. economy in 2015, with the creation of 2.75 million jobs and an average 3 percent wage increase. The prosperity should help spur an uptick in first-time-homebuyer activity, Smoke projects, particularly millennials who have been shut out of the game.

“This (2014) is probably the last year that the baby boomers will have a higher share of buyers,” he said.

Smoke said that new programs from Fannie Mae and Freddie Mac that allow buyers to qualify for a mortgage with a down payment of only 3 percent should further assist first-timers and millennials in purchasing a home. But that projection may not apply in expensive markets like the Bay Area.
“While first-time homebuyers have many economic factors working in their favor, increasing home prices will make it more difficult to get into high-priced markets such as San Francisco and San Jose,” Realtor.com noted in its report.

In fact, a recent study by Trulia found that the San Francisco metro area was the least affordable in the U.S. for millennial buyers.

(Image: Flickr/FutUndBeidel)

Where Does California Rank on a List of Property-Tax Rates? You May Be Surprised.

We love it when facts runs totally contrary to conventional wisdom.

Case in point: The National Association of Home Builders (NAHB) this week released a report on state real estate taxes across the nation, citing data from the U.S. Census Bureau’s latest American Community Survey. Living in high-tax California, we would absolutely expect to see the Golden State way up on the list of largest real estate taxes paid.

And sure enough, California had the 11th highest annual median real estate tax bill among the 50 states and Washington, D.C. in 2013 — $3,015.

Northeast states tended to have the highest tax bills, with New Jersey No. 1 in the nation at $7,331. The lowest taxes paid were in the South — Alabamans (they ranked 51st) paid $532. So California was solidly on the side of big-tax states.

But wait. Number-crunchers at the NAHB went on to note that it would also be useful to compared real estate tax rates. Most counties sets their own real estate tax rates, but dividing taxes paid statewide by the aggregate value of homes within a state reveals an effective real estate tax rate for each state.

By that calculation, the picture changes dramatically.

California, it turns out, has an effective tax rate of 0.77 percent, owing to its expensive real estate. It ranked 34th among the states.

To be sure, New Jersey is still No. 1 when it comes to real estate tax rates, at 2.09 percent, and Alabama was only one step above the bottom, at 0.39 percent. (Hawaii’s rate was 0.29 percent.) But California, in fact, sits quite comfortably among the low-tax-rate states.

Of course, this may be scant consolation for Bay Area homeowners who still pay hefty taxes for their high-value homes, but it’s worth noting a more accurate source of the pain.

The link at the top of this article will take you to the NAHB’s real estate tax report. For a look at the complete state rankings, including median home values, click here. 

(Image: Flickr/Colin Harris ADE)

California, Bay Area Housing Markets Nearly Stable, Says Freddie Mac

Over the past year, the U.S. real estate market has continued to stabilize, a Freddie Mac index says. That’s also true here in California and the Bay Area, with several of our local markets recovering faster than the nation.
Freddie Mac’s Multi-Indicator Market Index (MiMi) gauges housing stability by assessing four factors: home-purchase applications, payment-to-income ratios, the number of owners who are current on their mortgage payments, and employment rates. The MiMi then classifies a market as weak, stable, or elevated based on those criteria.

The latest MiMi data, which covers activity through July, gives the national housing market an index value of 73.4, still shy of the stable range of 80 to 120. The U.S. market  trended up over the previous year, with a gain of 5.4 percent on the MiMi scale. According to the index’s historical data, the U.S. housing market was last in the stable range in November 2008.

The MiMi gives California’s real estate market an index value of 77.5, up 9.1 percent from a year ago. The statewide market was last in MiMi’s stable range in August 2008. Freddie Mac’s statistics show that payment-to-income ratios and employment levels have both stabilized in California, with respective index values of 98.3 and 95.3.

Freddie Mac’s index also breaks out data for the 50 largest metro areas in the U.S., including San Francisco-Oakland-Fremont and San Jose-Sunnyvale-Santa Clara.

With an index value of 78.4, San Francisco is the closest of the California regions still in the index’s weak range to achieving stability. Currently, the only California region that Freddie Mac deems stable is Los Angeles.

San Francisco’s index value increased 7.8 percent on an annual basis. As is true across the state, San Francisco received stable scores for payment-to-income ratios (100.5) and employment rates (96.8). However, purchase applications were a weak spot, with an index value of 38.9, much lower than the national average.

The San Jose housing market is also headed toward firmer ground, with an index value of 75.5, up 6.5 percent from a year earlier. San Jose ranked as stable for payment-to-income levels (84.3),  current mortgage payments (80.4), and jobs (99), but still has a weak amount of purchase applications (38.3).

The MiMi says that San Francisco and San Jose real estate markets were last in the stable range in August 2008.


(Photo: Flickr/Horla Varlan)

Survey: Investors Losing Interest in Bay Area, Opening the Door for First-Time Buyers

Good news for Bay Area buyers: A recent survey found that investors today are far less active in the region’s real estate markets than in years past, helping to ease some of the fierce competition for homes.

The news is especially welcome for first-time buyers, who have struggled to compete against well-heeled investors paying all cash for starter homes and then turning them into rental properties or waiting a few months and flipping them at even higher price points.

The California Association of Realtors’ 2014 Investor Survey, conducted in May and released to the public on Wednesday, found that  investors are changing their strategies and moving away from buying homes in more popular, urban areas in favor of rural locations of the state where better deals can be found.

In 2014, nearly half (45 percent) of California investors said they purchased properties in rural counties such as Kern, Fresno, Merced, San Joaquin, and Tulare, up from 27 percent in 2013, according to the survey.

Meanwhile, 15 percent of investors purchased properties in Northern California in 2014, down significantly from 27 percent in 2013.

The organization gave an early look at some of the survey data two weeks ago, and Pacific Union reported at the time that rising home prices have curtailed investment activity in high-dollar Bay Area markets like Silicon Valley.

The survey also found that 67 percent of investors paid cash, and one-third were residents of foreign countries, with China, Mexico, Taiwan, and India being the top countries of origin. Investors owned an average of 8.3 properties in 2014, up from 6.5 properties last year.

Reflecting the recovering housing market, the majority of investment properties purchased in the last year (70 percent) were equity sales, while 18 percent were short sales and 12 percent were foreclosures.

Most investors said they made minor or no repairs to the properties, and 55 percent said they intend to sell them within six years.

(Image: Flickr/Woodleywonderworks)

Investors Slowly Back Off as California Home Prices Rise

Increasing prices are mildly cooling investment activity as the California housing market recovery continues, but these buyers still account for a substantial portion of sales.
In the California Association of Realtors’ 2014 Investor Survey – conducted in May and later presented in a webinar – real estate professionals said that investors made up 32 percent of their business, down from 39 percent in 2013. CAR figures that rising prices likely have something to do with the slowdown.
The median sales price for a single-family home in the state was $457,160 in June, a 7 percent annual increase. The current median price in California is 86 percent above its February 2009 low of $245,230 but still 23 percent short of its peak, set in May 2007.
In Pacific Union’s Silicon Valley region, where the median single-family home price has hovered around $2.5 million for most of 2014, escalating prices have also led to a noticeable decline in investor activity, according to company Vice President David Barca.
“The investment activity that has practically disappeared is for property that can be flipped or developed,” Barca says. “Prices are now so high that investors cannot realize acceptable margins when the property comes back on the market.”
California Investor Trends and Demographics
The vast majority of investors in the state – 80 percent — purchased single-family homes, a moderate gain from 2013. Investors have been moving much faster than typical buyers this year, scooping up properties in a median time of 15 days, more the twice as fast as the overall California market is moving.
Perhaps not surprisingly, investors are primarily motivated by profit, with 58 percent citing the potential to make money as their main reason for buying. Indeed, CAR found that about three-quarters of investors expect home prices to rise in the coming year and over the next half-decade.
And perhaps fearing another housing downturn, the majority of investors don’t plan to hold for long: 55 percent expect to keep the home for less than six years.
The survey also found that home flips across the state have increased on an annual basis, up from 20 percent in 2013 to 28 percent this year. Like the decrease in investment activity, CAR says that price appreciation is probably the main factor driving the trend.
Most of California’s real estate investors already have skin in the game, with 83 percent replying that they own at least one other property. Investors had an average age of 51 and skewed 75 percent male.
And as one might expect, the majority of Golden State investors are affluent and liquid: 58 percent earned more than $200,000 per year, and two-thirds paid all cash for their home.
CAR’s data shows that the state saw a slight 3 percent decrease in international investors from a year ago, but overseas buyers still make up about one-third of all California investors. China was the most prevalent country of origin for international investors.
But even though most California investors plan to sell in less than six years, Chinese buyers in the Bay Area don’t typically make deals to turn a quick buck, according to Pacific Union CEO Mark A. McLaughlin.
“It’s added a demographic of buyers who generally take a long-term view,” McLaughlin told KPIX in a televised interview in June. “They’re not sellers in the next five to seven years. So it is going to drive housing prices up.”
McLaughlin offered his in-depth thoughts on Chinese homebuyers in the Bay Area in a May interview with SFGate. And earlier this week, he explained Pacific Union’s unique China Concierge program in an interview with Real Estate Coaching Radio.


(Photo: Flickr/Steven Depolo)

Statistics Reveal ‘Typical’ California Homebuyer

The typical California homebuyer is 48 years old and an ethnic minority, with a college degree and a household income of more than $100,000.
Those statistics come from the California Association of Realtors’ latest annual survey of homebuyers, conducted in the first quarter of 2014. The survey found that the average homebuyer today is the oldest in at least 12 years, climbing from 35 in 2012 to 38 in 2013 to 48 in 2014. By ethnicity 36 percent of buyers are white, with Hispanics and Asian/Pacific Islanders each accounting for 26 percent of the total and blacks accounting for 12 percent.
Measured by household income, 17 percent of buyers reported an annual income of more than $200,000, with 27 percent earning $150,000 to $199,999 and 27 percent bringing home $100,000 to $149,999. Twenty-five percent of buyers are paid $75,000 to $99,999 per year, while only 3 percent earn $50,000 to $74,999.
In the Bay Area, only 22 percent of residents could afford to buy a home in the first quarter of 2014, a huge drop from two years ago, when 45 percent of residents could afford a property. The minimum household income needed to join the ranks of Bay Area homeowners was $140,977 in Q1 2014, up 56 percent from Q1 2012.
Other statistics from the CAR report:

• Previous homeowners accounted for 59 percent of buyers in 2014, with 40 percent previous renters and 2 percent living most recently with their parents.
• All buyers viewed at least 10 homes before buying; 56 percent viewed 20 or more.
• The percentage of first-time buyers peaked at 54 percent in 2012. It slipped to 42 percent in 2013 before plunging to just 12 percent in 2014.
• Buyers moved a median distance of 15 miles from their previous home.
• Nine out of 10 buyers made offers on previous homes.
• Fully 54 percent of buyers reported that they bought their home because of a price decease.
• Similarly, 54 percent of buyers said they are fully satisfied with their purchase, while 46 percent said they selected the best option given the limited supply of homes. A year earlier, 66 percent said they were fully satisfied.
• Buyers said they plan to keep their current homes for an average of 8.8 years, up from 6 years in 2013.

(Image: Flickr/Mark Moz)