Kyle Frazier, J.D., Broker Associate Ι Pacific Union International | Christies International Real Estate | (415) 350-9440

Bay Area & Marin Home Prices Reach Prerecession Levels

Real estate markets in the Bay Area and California hit a milestone in April, as median prices climbed back to levels observed before the Great Recession.

According to the California Association of Realtors April sales and price report, the median single-family home price in the state was $449,360, the highest since December 2007. Statewide, the median price increased 11.6 percent on an annual basis and 3.2 percent from March.

CAR says the California median price has increased year over year for the past 26 months but still has a ways to go before reaching its May 2007 peak of $594,530.

Across the nine-county Bay Area, the median home price rose to $768,110 in April, up 6 percent from March and 12 percent year over year. April’s median price was the highest recorded in the Bay Area since October 2007, when it reached $775,438. The Bay Area’s peak median, also achieved in 2007, was $821,539.

As in March, the median price in Marin and San Mateo counties was more than $1 million, though both markets saw prices decline from the preceding month. At $940,570, prices in San Francisco drew closer to the $1 million mark, while they broke $900,000 in Santa Clara County for the first time since CAR began tracking such data in 1990.

Home prices were up in all nine counties year over year, ranging from 1.6 percent in Contra Costa County to 23.5 percent in Solano County.

CAR expects California home prices to grow throughout the remainder of the year, Vice President and Chief Economist Leslie Appleton-Young said.

“Looking forward, it is likely that we will see a more moderate level of price increase throughout the rest of the year, and further improvements in sales in the spring home buying season,” Young said in a statement.

Declining inventory across the state, the Bay Area, and most of our individual local counties also points to further price appreciation in the coming months.

Throughout California, the months’ supply of inventory was 3.5, down from 4.0 in March but up from levels seen last April. At 2.4, the Bay Area MSI also declined from the previous month and was identical to its year-ago number.

Inventory decreased month over month in each of our nine counties with the exception of Sonoma, where it loosened from 3.2 to 3.7. At 1.8, the regional MSI was lowest in San Mateo and Santa Clara counties.

With an MSI of 4.5, Napa is the sole Bay Area county that could be considered a balanced market. Generally speaking, an MSI below 4.0 is considered a seller’s market, while a 6.0 and higher skews in favor of buyers.

Home Sales Catching Fire in Hot Market

CALIFORNIA PENDING HOME SALES JUMP FOR SECOND STRAIGHT MONTH

Maybe it’s the unseasonably warm California winter or the lack of rain, but Golden State pending home sales were more vigorous in February than normally expected.
According to the California Association of Realtors’ February pending and distressed home sales report, pending home sales spiked 14.2 percent from the previous month, the second consecutive month of gains. In January pending-home-sales growth was even stronger, increasing 23 percent from December 2013.

Distressed sales dipped slightly across the state from January to February and now account for 15 percent of all total transactions. All Bay Area counties included in the report, with the exception of Solano, bested or matched the state’s distressed-sales average.

 


ARE COASTAL CALIFORNIA MARKETS NEARING A BUBBLE?
Although the U.S. housing market appears to be in little danger of approaching a bubble any time soon, a recent Trulia study depicts most coastal California markets as currently overvalued.

Trulia estimates that homes across the nation are 5 percent undervalued in the first quarter, far below 2006 peaks, when properties were 39 percent overvalued. California regions dominate the company’s list of the top 10 overvalued metro areas, taking seven of the positions.

Locally, San Jose ranks as the sixth most overvalued U.S. market, with home prices 8 percent above a combination of incomes, historical prices, and rents. In San Francisco, Trulia calculates that 7 percent of properties are overvalued.

 


ENERGY EFFICIENCY TOPS LIST OF MOST POPULAR NEW-HOME FEATURES
Cutting energy-usage costs is one of the most important concerns for buyers of new homes, according to a survey conducted by the National Association of Home Builders.

Builders included in the poll rated energy-efficient appliances and windows and programmable thermostats as the most sought-after new-home features. Citing data from a 2009 study, the association’s press release says new homes owners typically save 13 cents per square foot on electricity compared with homeowners overall.

What other new-home features are moving the needle in 2014? Granite countertops, walk-in closets, high ceilings, and patios are all in-demand commodities, the survey found.

 


HOMEBUILDERS HOME IN ON CENTRALLY LOCATED LOTS
Builders of new homes increasingly favor lots closer to major metro areas rather than those in outlying regions, which is helping drive land prices skyward.

Referencing  John Burns Real Estate Consulting statistics, The Wall Street Journal reports that lot prices in the country’s pricier, more centrally located regions are back to levels seen nearly a decade earlier. In the article, CEO John Burns says builders cannot easily turn a profit in outlying areas because home prices are too low.

The Wall Street Journal notes that builders’ distaste for purchasing lots in more remote locations is one factor helping to impede new-home sales, along with rising prices and the absence of first-time buyers.

Bay Area Luxury Home Sales Reaching Record Levels

$2 MILLION-PLUS HOME SALES SOAR IN BAY AREA

High-end homes throughout the Bay Area sold at a record pace in 2013, according to a recent article in the San Jose Mercury News.

Citing figures from research firm DataQuick, the publication reports that 2,604 homes priced above $2 million sold in the Bay Area last year, a 28 percent jump from 2012 and the largest number since the vendor began keeping records.

Some of these luxury homes are bound to induce a bit of sticker shock. Atherton had the largest Bay Area sale of the year, with one home selling for almost $37 million. A $35 million transaction took place in San Francisco, while the costliest in Palo Alto was $15 million.

Million-dollar-plus home sales were also up across the Bay Area as a whole, growing nearly 41 percent since 2012. Alameda and Contra Costa counties saw the largest increases at this price point: 70 and 63 percent respectively.


U.S. HOME PRICE GAINS BEST SINCE 2005

Home prices across the nation grew year over year for the 22nd straight month and saw the largest gains in eight years, according to CoreLogic’s December Home Price Index.

“Last year, home prices rose 11 percent, the highest rate of annual increase since 2005, and 10 states and the District of Columbia reached new all-time price peaks,” Dr. Mark Fleming, CoreLogic chief economist, said in a statement.

In California, December year-over-year price increases were the second highest in the country, trailing only Nevada. Including distressed sales, prices grew 19.7 percent from December 2012; excluding distressed sales, they increased 16.2 percent.


SILICON VALLEY ECONOMY EXPLODING

The current tech boom is bringing high wages and low unemployment rates to Silicon Valley, so much so that recent SFGate article claims that its economy has returned to heights seen in the dot-com era.

Using data from Joint Venture Silicon Valley‘s annual index, SFGate reports that the region added 47,000 new jobs in 2013. Forty-five percent of households in Silicon Valley now earn in excess of $100,000 a year, and the per capita income is more than $70,000.

While all of those jobs have given the area an unemployment rate of less than 6 percent, they haven’t resulted in home construction meeting market demand. Last year, 33,000 people moved to the Silicon Valley region, yet developers built just 6,500 new homes.

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The median home sales price across the nine-county Bay Area continued to enjoy vigorous year-over-year growth in December, capping off an exceptionally healthy 2013 throughout our region.mansion_money

Bay Area home prices increased 23.9 percent from December 2012 to December 2013, according to figures released earlier this month by research firm DataQuick.

Although the median price declined a fraction of a percentage point from November, December marked the 14th straight month of 20-percent-plus year-over-year gains. The $548,500 median sales price is currently 47 percent higher than its March 2009 low, yet still 18 percent short of its July 2007 peak.

Across our nine local counties, Alameda showed the largest yearly price gains in December, at 28 percent. San MateoSolano,Contra CostaNapa, and Sonoma counties also posted price increases of more than 20 percent in that same time period.

Though year-over-year gains in San Francisco were the smallest in the Bay Area — at 12.9 percent — the city’s December median price of $813,000 was the highest in the region.

In terms of sales volume, the final month of 2013 was the slowest December in six years. DataQuick reported sales of 6,714 single-family homes and condos, a year-over-year decline of 12.7 percent. Eight of nine Bay Area counties saw sales volumes slip by double-digit percentage points from December 2012. The lone exception was Alameda County, where home sales were down just 4.4 percent from last year.

According to DataQuick, a lack of inventory across the region spurred the sales-volume decrease, but company President John Walsh said continued price appreciation could help inventory expand over the next few months.

“If current trends hold, including year-over-year price appreciation of 20-plus percent, the typical home would be selling for $50,000 to $60,000 more by spring,” Walsh said. “That could loosen up quite a bit of inventory.”

Pacific Union’s recently released Q4 2013 quarterly report shows that in December, the months’ supply of inventory hit a yearly low in every one of our Bay Area regions except for the East Bay and Sonoma Valley.

Both investor activity and all-cash offers were up slightly from the previous month but down from December 2012.

Investors snapped up 23 percent of available homes in the Bay Area, 2.4 percent more than in November and 3 percent less than last December.

All-cash offers, which were commonplace throughout 2013, increased a slight 0.4 percent from the previous month and declined 7.4 percent year over year.

Marin County Real Estate (Q3 2013)

Marin County: Q3 Results
July was a very busy month in our Marin County region, followed by a seasonal lag in August and early September. The number of homes for sale remains constrained, keeping prices high and buyers scrambling, although we saw a slight uptick in the number of available properties in September.Homes priced $800,000 to $1 million saw aggressive bidding, and those priced above $1.6 million also saw robust sales, but the overall market calmed down somewhat after several quarters of increasingly overheated activity. The furious bidding that we saw in June had settled by September. Still, homes that are priced correctly and in popular neighborhoods – the Mill Valley market remains strong, for example – sold quickly.Investors remained eager to buy lower-priced properties, although that market tightened considerably in the third quarter. This is due in part to fewer foreclosures and short sales entering the market after months of rising home prices helped many underwater owners regain equity.

Looking Forward: We expect to see very strong sales in October and into early November – particularly if the inventory of available homes continues to expand – before activity slows as the holiday season approaches. Rising interest rates remain a wild card, constraining sales or perhaps prompting buyers to move fast.

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

Median Sales Price
The median sales price represents the midpoint in the range of all prices paid. It indicates that half the prices paid were higher than this number, and half were lower. It is not the same measure as “average” sales price.
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Months’ Supply of Inventory
The months’ supply of inventory is a measure of how quickly the current supply of homes would be sold at the current sales rate, assuming no more homes came on the market. In general, an MSI below 4 is considered a seller’s market; between 4 and 6 is a balanced market; and above 6 is a buyer’s market.
Click to view larger chart
Average Days on the Market
Average days on the market is a measure that indicates the pace of sales activity. It tracks, on average, the number of days a listing is active until it reaches “pending” status, meaning all contingencies have been removed and both parties are just waiting to close.
Click to view larger chart
Percentage of Properties Under Contract
Percentage of properties under contract is a forward-looking indicator of sales activity. It tracks expected home sales before the paperwork is completed and the sale actually closes.
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Sales Price as a Percentage of Original Price
Measuring the sales price as a percentage of the final list price, which may include price reductions from the original list price, determines the success of a seller in receiving the hoped-for sales amount. It also indicates the level of sales activity in a region.
Click to view larger chart

Marin Luxury Homes | Real Estate | April 2013 Report

Marin County sellers enjoyed the best of both worlds in the first quarter of 2013: Their homes sold quicker than they have in years, and median sale prices rose considerably. For buyers, it was another story. The supply of homes for sale continued to shrink and multiple offers were common – they often faced over a dozen offers for desirable, well-priced properties. In particular, first-time buyers (e.g., buyers who required financing) were disheartened as their bids were overcome by all-cash offers time and again.The tight market prompted a rise in off-market deals – transactions that close without ever being listed on real estate websites or multiple listing services. So far in 2013, I have had several properties close in this manner.Tiburon was especially active in all price points, especially the market for homes priced at $2 million and higher. In Novato, homes priced at $800,000 to $900,000 sold as soon as they became available, and sales rose noticeably in the $2 million-plus market. Mill Valley, San Rafael, and Corte Madera were also busy in the quarter.We also experienced fewer distressed homes coming to market. In recent years, the number of short sales, foreclosures, and bank-owned homes had been on the rise, but that supply has mostly sold. Investors remain active in the market, though their numbers are not as high as in 2011 and 2012.

Looking Forward: We expect to see more homes coming on the market in April and continuing through the summer months. Multiple offers will remain the norm throughout the second quarter, although a greater supply of homes will bring more balance to the market.

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. Contact Kyle Frazier for sales data relating to these communities.

Sellers, Start Your Engines!
After record-breaking results in 2012 for units and volume of residential real estate, activity in the first quarter suggests 2013 will once again reach new highs. Local trends drive the dynamics of our markets, but overall we expect 15 to 17 percent increases in units sold in the Bay Area and price appreciation of 4 to 9 percent.The single most important dynamic driving this growth is our healthy regional job market. Economist Stephen Levy noted that the Bay Area led California job growth in January, with San Francisco at the forefront and the Oakland, Napa, Santa Rosa, and Vallejo metro areas all posting gains far above the state and national average.These are high-quality, high-paying jobs in the technology and professional services sectors. We believe confidence in jobs and business in general is driving consumer confidence and the intense pent-up demand for residential real estate. 2013 may be the last year of this cycle that money (mortgage interest rates) remains on sale as real estate prices lift from the bottom and consistent appreciation returns for a sustainable period of time.Intense demand is occurring even as the supply of available homes remains constrained, and coupled with modest price appreciation is driving the return of equity into homes. This may allow more sellers to realize gains, sell existing homes, and trade up to new dream homes or neighborhoods.These dynamics are occurring in nearly every one of the markets Pacific Union serves, and we expect it to entice move-up buyers to act – making them a likely source for new, mid-tier inventory.
 

The Sellers’ Market Heats Up

It has been a bitterly cold few years for would-be sellers in the Bay Area, but spring is bringing welcome warmth for both home values and buyer activity.Home prices have been rising for a year across all of Pacific Union’s eight regions in the Bay Area and Tahoe/Truckee. In San Francisco the median sales price of homes rose nearly 30 percent in the first quarter from a year earlier, and double-digit increases were recorded in all other regions as well.In a recent Wall Street Journal survey economists agreed that home prices will continue rising at least through 2017, and the Bay Area’s strong economy suggests price increases here will outpace those in most of the rest of the nation.Those rising values translate to greater equity, and many homeowners who believe they are “underwater” – owing more on their mortgages than their homes are worth – may be surprised to learn that they’ve regained equity based on recent sale prices for comparable homes in their neighborhood.Why the lift? In part it’s because a persistent shortage of homes for sale has created a veritable army of aggressive and highly motivated buyers who are willing to outspend the competition. For example, in our East Bay offices, 90 percent of transactions in the first quarter involved multiple offers; on average, homes sold for 13 percent over asking price.Homes in the Bay Area sold within weeks of coming on the market, frequently in all-cash deals, and multiple bids pushed sales prices above asking prices in all regions, much to the delight of sellers.
Click to view larger chart.
 

Overall, the increased velocity of real estate activity in the first quarter of 2013 was nothing short of remarkable.This means that sellers looking to trade up to a higher-priced home may now make significant gains in the current market. For example, consider a homeowner whose property was valued at $300,000 in 2006 but dropped 20 percent in value to $240,000, for a loss of $60,000. That same 20 percent drop in value for a higher-priced home – say, a $450,000 home now valued at $360,000 – gives a trade-up buyer savings of $90,000, or a net gain of $30,000 on the new home.Today’s low mortgage rates also offer serious savings to trade-up buyers. In 2002, when the interest rate on a 30-year fixed-rate mortgage stood at 6.5 percent, the monthly payment on a $500,000 loan was $3,160. At current rates, which hover around 3.6 percent, approximately the same loan payment would buy a home with a $700,000 mortgage – a net gain of $200,000.The benefit won’t last forever, so prospective sellers should move quickly: A report from the Mortgage Bankers Association predicts that rates will average 4.4 percent by the end of 2013. That 0.8 point rise will add $230 to the monthly payment on a $500,000 mortgage.So if you’re thinking about selling in this blazing market, don’t get burned by waiting too long. And count on the expertise of a real estate professional who knows the local market to help assess your home’s current value and prospects. Looks like it’s shaping up to be a hot season for sellers!If you have any questions or would like a custom market analysis of your home’s current likely sales price, please call me.

My name is Kyle Frazier. I am a Broker, Certified Residential Specialist (CRS), and Certified Luxury Home Marketing Specialist (CLHMS) with Christie’s Great Estates | Pacific Union International Realtors.

And if you are a buyer, I am also a member of the Top Agent Network (Top 10% in Marin County) and the Marin Platinum Group (Top 100 agents in Marin County). These are elite agent networks with access to dozens of homes being marketed informally and not on the MLS. It is always my pleasure to be of service. Call me at (415) 350-9440.

Pacific Union – Christie’s International Real Estate | Marin County, CA Luxury Home Sales (February 2013)

Pacific Union – Christie’s International Real Estate | Marin County, CA Luxury Home Sales (February 2013). Beginning in November 2011, I began to note that Marin County buyers were feeling much more confident — that confidence translated into increased sales in 2012 across the board, from Sausalito to Novato. So far in 2013, year-to-date sales volume is down 9% from a year ago. Units sold are down 15%, but the median price is up 18.5% at $669,000. Average DOM is running at 103 days, which is down 16.75% from this time last year. Truly, the only hindrance to higher sales numbers is the virtually complete lack of homes for sale. Buyers and their agents are desperate for inventory. And this is not limited to just Marin. Agents throughout the San Francisco Bay Area are noting a similar trend.

Here are two examples of completely different market segments reflecting identical inventory shortages:

1) Tiburon & Belvedere — at the time of my writing the Tiburon & Belvedere Real Estate Report for February 2013, there were 9 homes in the MLS under $2 million. ALL of them were in escrow and there was not a single home priced under $2 million available on the MLS.

2) Novato — at the time I wrote my Novato Real Estate update for February 2013, 74% of homes priced under $500K were in escrow. Three of the five available homes were new to market and are in ecrow today. Essentially, the absorption rate in Novato under $500K is a fraction of a month. There is simply not enough inventory to satisfy demand. Investors and eager buyers are bidding up virtually all properties in this entry level price band.

 

Marin County Real Estate Market

Marin County Real Estate Market

Incredibly low inventory, historically low interest rates, a growing pool of “ready, able, and willing” buyers, are combining to make for an unprecedented Marin County real estate market. The sales numbers relative to inventory are truly unheard of. My advice to sellers this year is — “Join The Party!”

CALL ME if you are thinking of selling (350-9440). My systems can get you on market quickly with the very best marketing available. And my negotiation skills will net you more money on the sale of your home.

Pacific Union – Christie’s International Real Estate | Marin County, CA Luxury Home Sales (January 2013)

Pacific Union – Christie’s International Real Estate | Marin County, CA Luxury Home Sales (January 2013). The new year dawns with bright prospects for an active and successful 2013 in Bay Area real estate. But 2013 comes after an awkward year of recovery. Buyers, champing at the bit after a half-decade of retrenchment and recession, were forced to compete with each other for a limited supply of homes as sellers held out for higher prices after years of declines. Bidding wars became commonplace. However, prices drifted only slightly higher despite excruciatingly low inventory. Here’s a look back at the busy year that just ended:

JANUARY — The latest jobs data shows the first signs of economic recovery, with California’s unemployment rate falling to 11.1 percent in December 2011, the second month in a row the number declined. (Quick jump ahead: by November 2012 the unemployment rate had dropped further, to 9.8 percent.). Pacific Union International’s Q4 2011 Real Estate Report is released. In it we declare that 2012 “could be one of the finest times in the past twenty years to be a buyer of real estate,” with low home prices and exceptionally low interest rates. We were right on the money.

FEBRUARY — Sellers are urged to “join the party” as the number of homes under contract jumps significantly. In Marin County, homes under contract were up an astounding 82 percent from the start of the year. A look at the math shows that historically low interest rates give homebuyers an extra $100,000 in purchasing power. (And it still holds true today.)

MARCH — Rental rates are rising precipitously across the Bay Area — up 16 percent in San Francisco — making buying a home an even more attractive option.

APRIL — Pacific Union gets kudos from our peers with the release of a Real Trends survey showing that our real estate professionals are the fifth most productive in the United States and a report from Real Estate Magazine naming us one of the nation’s top “Power Brokers.” Buyer demand in the first quarter drives an increase in the number of homes sold in all seven of Pacific Union’s Bay Area regions. The upcoming America’s Cup yacht races are fueling a boom in San Francisco real estate as buyers jockey for homes with commanding views of San Francisco Bay.

MAY — Homes are more affordable than ever, according to a report from the California Association of Realtors. The percentage of households that could afford to purchase a median-priced, single-family home in the Bay Area rose to 45 percent in the first quarter, a record high. Rising home sales and prices make clear the housing recovery is on solid footing in the Bay Area, according to our own monthly market analysis and a report from the California Association of Realtors. Pacific Union expands in Northern California with the opening of offices in the North Lake Tahoe area.

JUNE — The Bay Area housing market and overall economic scene continue to set the pace for the national recovery, and sometimes that means standing in contrast to gloomy national reports. We’re pleased to report that Pacific Union is expanding again, this time launching Pacific Union International Property Management Inc. Kudos continue: A list of the top 1,000 real estate professionals and teams in the United States includes three from Pacific Union. Reports in the national news media declare that “the housing bust is over,” which comes as no surprise to homebuyers and sellers in the Bay Area.
JULY — Pacific Union’s exclusive interview with economist Stephen Levy makes clear that the economic recovery has reached all corners of the Bay Area and is enduring. Our Q2 Real Estate Report shows home sales are up more than 30 percent across the Bay Area, foretelling a strong year ahead.

AUGUST — The Bay Area continues to lead California’s economic recovery, and that’s good news for the region’s housing market. In a sign of how tight the housing market has become, the Oakland metro area is No. 1 in the nation for the greatest reduction of homes for sale. It’s also No. 1 for the shortest number of days on the market.
SEPTEMBER — Foreclosure activity drops sharply across the Bay Area, led by San Francisco, where notices of default — the first step in the foreclosure process — fall 71 percent from a year ago. The Bay Area’s red-hot real estate market continues to set records, with August home sales at a six-year high. Home ownership can bring big savings when compared with the cost of renting in San Francisco and Oakland, according to a report from the online real estate search service Trulia.
OCTOBER — The East Bay housing market has trailed San Francisco in its recovery from the recession, but recent reports suggest the region’s economy is poised for substantial growth in the coming year. Our Q3 Real Estate Report has plenty of good news in it: Home values are rising, foreclosures are dropping, and housing starts are increasing across the Bay Area. We’re on track to see the best year in housing since 2005 in many regions.
NOVEMBER — The monthly Case-Shiller home prices report confirms that home prices continue to rise at a steady pace across the Bay Area as well as nationwide, but a close look at the numbers also reveals much more: the extent of the housing market collapse five years ago and the strength of the recovery now under way.
DECEMBER —  The supply of homes for sale in the Bay Area remains severely constrained, but that hasn’t held back buyers. They’re snapping up properties at a pace we haven’t seen in at least six years. Tech companies like Pinterest and Square are increasingly choosing San Francisco over Silicon Valley for office space, and that’s having a direct effect on residential real estate in the city. The Bay Area continues to drive California’s economic recovery, with the state’s unemployment rate dropping below 10 percent for the first time in nearly four years. That’s a good sign for real estate markets.

Source: PacUnion.com

Kyle Frazier, J.D. & Broker, Certified Luxury Home Marketing Marketing Specialist (CLHMS), Certified Residential Specialist (CRS), Realtor with Pacific Union | Christie’s International Real Estate. Call Kyle Frazier at 415/350-9440 for more luxury home market information in Marin County, California (the San Francisco Bay Area’s “North Bay”).

Pacific Union – Christie’s International Real Estate | Marin County, CA Luxury Home Sales (November 2012)

Pacific Union – Christie’s International Real Estate | Marin County, CA Luxury Home Sales (November 2012) | By now you’ve heard the optimistic news emanating from the media and real estate experts across the country: Housing markets are back on their way up.

Home values are rising, foreclosures are dropping, and housing starts are increasing. In addition, the Federal Reserve’s plan to purchase mortgage-backed securities to the tune of $40 billion a month should contribute to the climb by pushing down mortgage rates and boosting home prices.

Sounds like great news, and it is. But to those of us in the Bay Area, it’s a bit of old news. In January, we predicted we’d see the best year in housing since 2006. So far we have – and there are strong indicators that will continue.

Our belief relies on sustained job growth, low interest rates, and aggressive buyer demand. Time will tell if our hunch is correct.

If there’s a downside to all this, it’s that buyers who have been waiting on the sidelines hoping to pounce on a foreclosure or distressed property have likely missed their opportunity. The records being set for number of homes sold in the Bay Area are being accomplished with limited inventory, and this will contribute to price appreciation.

The combination of buyer demand and a continuing constrained supply of available homes is leading to a return of one of the hallmarks of the heyday of Bay Area real estate: the bidding war.
Multiple offers on well-priced properties are becoming the norm in many areas, and for every one buyer who lands the home, there are several frustrated suitors even more determined to find a new abode … thus fueling more multiple offers. We predict housing will be 3 to 6 percent more expensive by this time next year.

Pacific Union Int’l – Christie’s Great Estates | Marin County, CA Luxury Home Sales (July 2012)

Pacific Union Int’l – Christie’s Great Estates | Marin County, CA Luxury Home Sales (July 2012)

As we close the books on the first half of 2012, we’re pleased with what we see in the rear-view mirror.

Here in the Bay Area, we experienced an over-30 percent increase in homes sold, year over year. Many of Pacific Union International’s regions continue to show robust and dynamic growth in homes sold, putting them on track to post their best years since 2005.

And we are even more excited about what lies ahead with Bay Area real estate. We’ve seen numerous positive indicators in our regional data, including firm pricing, multiple offers, and fewer days on the market – all of which support the belief that the current Bay Area housing demand is indeed sustainable.
Meanwhile, sellers are slowly coming off the sidelines, and we are finally seeing an improvement in the number of available homes for sale. This suggests that people are more confident of getting the sales prices they want.

On a larger scale, the real and marked improvement in our Bay Area economic engines, particularly with job growth and the successful technology sector, indicates that the bottom of the real estate market is finally behind us and we are at long last in a new market.

The second-quarter real estate market in Marin County mirrored the first quarter: extremely strong sales but a limited supply of inventory. We saw multiple offers on most desirable properties, with buyers outnumbering sellers across the county.

Home prices climbed higher in the last quarter but are still below levels at the height of the market. People who bought homes in 2005 and 2006 are choosing not to sell for a reduced price, which helps explain the dearth of homes on the market.

In another continuing trend, first-time buyers had a difficult time competing against investors able to pay cash for properties. The investment market remains strong, with buyers having no trouble finding renters for their properties.

Looking Forward: There’s no sign of a sales slowdown in the third or fourth quarters, putting us on track to post our best year since 2005. And home prices are rising, which should encourage more sellers to join the market and relieve the inventory shortfall.

We recently had a conversation with Stephen Levy, one of the top economists in California, whose observations on these topics further fueled our optimism as we swing into summer. We’re sharing that exclusive interview with you in this quarterly report and are confident you’ll find it as valuable as we did. Please see below.

Exclusive: Pacific Union’s Interview With Stephen Levy
In late June, Pacific Union International spoke exclusively with Stephen Levy, director and senior economist of the Center for Continuing Study of the California Economy (CCSCE) in Palo Alto, about the state of the economy and the real estate market in the San Francisco Bay Area. Here are the highlights of our interview.

Pacific Union: Housing markets are on fire, but this seems to be consumer-led rather than job-led. What’s your view of the Bay Area versus the state as a whole?

Stephen Levy: For the San Jose and San Francisco metro area, jobs are on fire. The San Jose metro area is the fastest-growing large metro area in the U.S., measured by jobs, and the San Francisco metro area (San Francisco, San Mateo, and Marin counties) is close behind. We’ve seen 2.8 percent (San Francisco) to 3.5 percent (San Jose) growth from May 2011 to May 2012, which is way ahead of the nation.

It’s also IPO-led. It’s job-related, but also tied to the ability to cash out from the successes of LinkedIn, Google, and Facebook.

Is the Bay Area still in economic recovery, or are we transitioning to growth?

Both. The Santa Clara valley and San Francisco are transitioning to catch this new wave of growth. Most of the state and most of the rest of the Bay Area is still struggling with the lack of construction and lack of government jobs; there hasn’t been really any big pickup in home building. They’re definitely in recovery. The only places you could say are in a new growth mode are San Francisco and San Jose.

How bullish are you on an appreciable drop in the unemployment rate?

Santa Clara is at 8.2 percent, and both San Francisco and San Mateo are below 8 percent already. Those counties will have their own special bonanza. The state is at 10.9 percent unemployment and won’t see 8 percent for three years at an absolute minimum. But the Bay Area will be below 8 percent as a region.

I wouldn’t worry about the unemployment rate quite as much as the rate of job growth. If it stays up, it’s because people are pouring into the workforce.

Are you saying that the job-growth rate is a more meaningful economic indicator than unemployment?

Yes, absolutely. My mother, who made clothes, always said, “You’re only as good as your next season.” Our current “next season” is looking pretty good. It’s not just Facebook and LinkedIn, it’s the big run-up in value of Apple, Google … it’s pretty broad.

What do you see happening in Contra Costa County? Many corporations have moved out there and it seems attractive for business.

I think it’s an incredibly attractive area for the same reason it has been for past 15-20 years: It captures both the labor market within the region as well as the labor market close to it in the Central Valley — Stockton and Tracy, and further out. It’s very well placed for the labor force. They’re not doing what San Jose and San Francisco are doing, but for the long-term future they have a great location.

Housing has been on a tear in Marin lately. Is that due to a jobs uptick?

They have low unemployment, but a lot of those folks work in the city. I don’t know about job growth — unemployment tends to affect you where you live, while job growth is where you work.

Is there any bright news ahead for the East Bay?

I think they’re caught up in the national slowdown. I think they’ll do fine once we get into a strong recovery nationally. They were a home-building center, and have been hurt by that. They’re a very strong region, and historically have had location and price advantages.

In the Wine Country — Sonoma and Napa counties — we’ve noticed increased demand lately, especially for vacation homes. Do you see job growth as an engine there?

That area is not my specialty, but I don’t think the home buying you are seeing is related to local job growth. Foreign investors from affluent areas find California prices cheap — in Napa as well as Palo Alto and Newport Beach. I think Napa and Sonoma are connected to both the overall Bay Area high-end economic growth and to the worldwide tourism/retirement demand.

The Pew Research Center just released a report, “The Rise of Asian Americans” talking about how Asians are now our largest immigrant group. What I see is that the Asian buyer market is on fire, both with new immigrants and because Chinese and other Asian folks are heading into tech companies as employees.

Finally, is there anything you see driving jobs besides tech?

There has been a resurgence in convention and tourist activity. Hotel and tourist numbers are up. Foreign trade has also been doing pretty well. Tech, trade, and tourism — the three Ts — bring other economic improvement along with them. Retail sales are picking up as the income flow from the tech sector begins to spread into restaurants, car dealerships, and other areas.