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High Demand, Low Inventory in the Bay Area Real Estate Market

Bay Area real estate trends show this to be one of the hottest markets in the country

There are lots of buyers looking for a home in the Bay Area real estate market. In fact, similar to recent real estate market trends across the country, there is no shortage of demand. There is, however, a lack of inventory. Home sales in the United States are at their lowest in terms of supply in seventeen years.  In other words, current trends increasingly show a small number of houses on the market for a large (and growing) population of interested buyers.

The result for the housing market nationwide is that home prices are going up – an effect certainly felt in the Bay Area real estate market as well. With so much demand on such a small number of homes, sellers are in a position of being able to list their home at price points considerably higher than usual.

Nationwide, the median sales prices for homes sits at $232,000. Despite the fact that the number of homes for sale is down by 13% year-over-year, sales growth is up by 8.9% as of last month. This reflects higher sales numbers for a fewer supply of homes throughout the United States. A total of 32 out of 90 metro areas nationwide experienced a double digit increase in sales since last year. This means that more than a third of metro areas in the U.S. saw their home prices increase dramatically.

The effects of high demand and low inventory

The increased demand and higher sales prices makes it more difficult for first time buyers to get into the market. By the end of December 2016, first time buyers represented just 32% of the market. This is noticeably below the 40% share that realtors and economists note as a benchmark for a healthy real estate market.

In 2016, a total of 37% of homes that sold were purchased by buyers who did not live in them. Instead, they were purchased by people with the intention of being rented out. What this means is that more people are becoming renters instead of buyers, and often not by choice. As of last summer, the home ownership rate in the United States was the lowest it has been in more than 50 years. The price of homes is increasing faster than incomes are rising.

The hottest real estate markets in the country include Denver, Seattle, and of course, the Bay Area market.

The Bay Area real estate market

In many parts of the Bay Area real estate market, prices stabilized somewhat from August 2016 through to the end of the year. Come January, however, prices began to increase. The high demand for a low supply of properties has not let up since.

Last month, the majority of buyers in the Bay Area real estate market paid over asking price for their home. In San Jose, 69.6% of homes went above asking, and home sales in general went up. Over in San Francisco, 66.7% of homes went above asking, and in Oakland, that number came out to 65.9%. Meanwhile, in San Jose, a -25.9% decrease of homes for sale year-over-year occurred.

According to the National Association of Realtors, the average qualifying income to be eligible for home ownership is $42,962. This corresponds to the national median home price of $232,200. But in San Jose, the median home cost is $1,00,500. This makes the qualifying salary to buy in the area $183,730. In fact, a news report this week stated that the Bay Area is now so expensive that even some six figure salaries are now supposedly “low income.” According to the U.S. department of Housing and Urban Development, a household income of $105,350 is now “low” for families of four living in San Francisco or San Mateo counties.

North of San Francisco

North of San Francisco in Marin county, the median listing price for homes as of March 31 this year hit $1,249,000. Home values in Marin county have increased by 7.5% in the past year. They are likely going to continue to rise. In fact, the median list price per square foot of homes that are on the market in Marin county is $640. Recent Bay Area real estate trends show that this is higher than the average for the metropolitan area of San Francisco. The average in San Francisco sits at $495 per square foot.

Meanwhile, Napa is ranked the seventh least affordable US housing market in March of this year. And experts say that going forward they expect Napa home prices to increase to their highest levels in eight years. The California Association of Realtors reports that the median home price for the area is $606,494.

Santa Clara County

In Santa Clara County, particularly the South Bay, there have been some interesting trends across its real estate sales. This past quarter, there were fewer properties for sale in Cambrian than there have been during Q1 of previous years. In Campbell, as is often the case in many Bay Area real estate trends, sales price records continue to be broken. Last year the Campbell real estate market saw the highest ever sold price for single-family residences. That alone is noteworthy. But during the first quarter of 2017, that record was broken by almost $100,000. This set a new benchmark for home prices in this part of the Bay Area real estate market.

Fewer days on the market

Over in Willow Glen, real estate trends indicate that there has been a significant decrease in the number of days on the market during the last quarter for condos and townhomes. In January, an average of 42 days on the market was typical for these types of properties. By the end of the quarter, 14 days became the average amount of time on the market.

Other areas, including Blossom Valley, Cupertino, Evergreen, Mountain View and Saratoga, to name a few, have also seen fewer days on the market recently in comparison to before. The only exception to the rule is Los Gatos. Properties there averaged about 46 days on the market in the last 30 days. This is a 9.5% increase in days on the market compared to the 46 day average seen in the last 180 days.

Bay Area real estate market trends

As far as Bay Area real estate trends go, Blossom Valley saw the most dramatic drop in the number of days on the market recently. Over the last 180 days, a typical amount of time for a home in Blossom Valley to be on the market was 27 days. In the last 30 days though, this number was reduced by a whopping 51.9% – to just 13 days on the market.

Cupertino and Sunnyvale have seen the fewest number of days on the market over the past 30 days. For both these areas in the South Bay, homes are currently averaging just 9 days on the market. For Cupertino in particular, this is an especially noteworthy drop in comparison with the past 180 days. The average number of days on the market then was 17 – over a week more, and 47.1% higher than the current average.

Why is this happening?

Why is this happening all of a sudden in the Bay Area real estate market? With economists predicting that the Federal Reserve will increase interest rates a total of three times this year at a minimum, the high demand resulting in fewer days on the market could be a result of buyers wanting to lock in on a property quickly before interest rates rise. Once the Federal Reserve increases its interest rates, this can have an indirect but still noteworthy impact on mortgages for homeowners.

Sell your home for the highest price at only a 4% real estate commission

A recent sale in Almaden Valley

In Almaden Valley, a recent sale by SoldNest breaks a new record in the area. Sitting in the desirable Almaden Valley Springs neighborhood, 1098 Foxhurst Way was originally listed at $1,549,000. In less than a week, an offer for $1,650,000 came through, with no contingencies. The seller accepted, breaking a record in the process and saving $33,000 by selling with SoldNest. Previously, the highest home sold on the street went for $1,600,000, and was 700 square feet larger. This recent sale breaks the record for the highest price per square foot in the Almaden Valley Spring neighborhood. It exemplifies yet again the low supply of homes and increasingly high demand in the area.

Even with a high demand, marketing your property to its highest potential is still pivotal. For 1098 Foxhurst Way, we created a custom video and narrowed in on relevant and effective digital marketing tactics. The right marketing and ability to target the buyer most likely to invest in a property like yours are key.

If you’re thinking of selling your home in the Bay Area, SoldNest can help. We have the expertise and the resources essential to creating the best possible selling price for your property, and you’ll save thousands. Demand is high and inventory is low, so many would argue that it’s a seller’s market. Despite this, it is still important to be able to optimize the marketing and final sale of your home. SoldNest can do this for just 1.5% of the listing fee.

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