Market Update: July
Plenty of Bay Area Buyers,
But Why Are They Hesitant?
- While April’s momentum is slightly slower in May, sales are still only 2 percent below last year’s highs after double-digit declines earlier in the year
- Affordable sales picked up again with sales of homes priced below $1 million up 3 percent year-over-year, the first two-month consecutive annual increase in the last four years.
- For-sale inventory growth is slowing after the winter jump with homes averaging seven days longer on the market.
- Buyer competition picks up again with 58 percent of homes selling over the asking price.
- Bay Area housing market correction resembles “Table Top” with prices remaining flat, compared to “Mountain Top” seen in the last cycle when prices fell significantly following the peak.
Following a solid improvement in the Bay Area housing markets in April, May homes sales activity continued with the momentum, albeit slower. Total home sales were 2 percent below last May, following April’s upwardly revised 1 percent year-over-year decline. The rate of declines has slowed considerably after double-digit declines seen in the first few months of 2019. Taking the first five months of the year together, sales are 5 percent below last year.
However, while declines continue to be driven by slower sales in Santa Clara and San Mateo Counties, East Bay home sales are keeping the momentum. Napa County sales jumped 6 percent after a 6-month losing streak, averaging 20 percent annual declines. San Francisco County, the spotlight of expectations around IPO impacts, remained relatively flat with last year, down 1 percent, though San Francisco sales peaked last May at the highest numbers of May sales in at least the last four years. Overall, most markets except Sonoma County saw improvement in sales in at least one price range. Table 1 summarizes year-over-year changes in the number of homes sold by price range.
Source: Source: Terradatum, Inc. from data provided by local MLSes, June 7, 2019
While buyer competition is not at the same level as last summer, when housing market activity peaked, it continues to ramp up from slower start to 2019. Seasonally, buyer competition peaks in May with the highest rate of homes selling over the asking price in a given year. This May, almost 6 in 10 homes sold over the asking price, which is below the last three years when about 7 to 8 in 10 homes sold over the asking price, but still suggest solid buyer demand.
It is clear that the strength of the Bay Area economy and continued job growth is driving solid demand from buyers across the region, both for affordably priced homes as well as higher-priced homes. And while the number of sales is lower than last year, it is important to keep in mind that last summer housing market activity peaked, and current conditions are suggesting leveling off or normalization of those unsustainable trends, particularly in areas in Silicon Valley or post-fire Sonoma. Further, buyers are holding off fearing that a housing market correction is inevitable and they are waiting for sellers to yield further and lower their expectations. And while recent softening of price growth suggest correction is under way, it is unlikely that it will be the correction that we saw in the last housing cycle. Credit conditions are significantly different than in the last cycle.
The current housing boom was driven by exceptionally solid underwriting and significant share of all-cash purchases, coupled with almost negligible new construction growth, both of which suggest that the correction path is looking notably different. Table Top” is unlike the “Mountain Peak” seen during the last housing cycle in 2004 to 2017 when home prices rapidly declined as much as 60 percent following the peak.
John Burns Home Value Index
Source: Pacific Union International Real Estate Economic Forecast, San Francisco Bay Area to 2020
Here’s How to Get interior White Paint Right
By Nick Granoski
There seem to be endless shades of white to choose from for paint. We recently painted our living room and the interior trim of our home white—this article from Elle Decor helped us find just the right hue (we used Benjamin Moore Simply White due to the amount of natural lighting in our space). It was a relatively easy way to update our home, and despite my skepticism at first, choosing the right white really did make a big difference.
Real Costs to Maintain Your Home in California…
Some of the trends for home maintenance include:
- Atherton ranks as the most expensive city in California for home upkeep, an average of more than $27,000 per year.
- Costing nearly $1,800, replacing a swimming pool’s filtration system is the most expensive routine home-maintenance task, . Most pools require owners to do this every two years.
- California homeowners can expect to spend nearly $17,000 each year to maintain their properties, higher than the national average.
Almost all new homeowners have calculated their monthly mortgage payments, but fewer have likely factored in the cost of routine maintenance tasks.
An analysis by home-remodeling portal Porch breaks down home-maintenance costs by states and ZIP codes, as well as individual jobs. Though it’s commonly accepted wisdom that owners should expect to spend 1 percent of a home’s cost on maintenance each year, Porch determined that nationwide, Americans spend an average of $16,000 on home upkeep annually, assuming that the work is outsourced to professionals.
Not surprisingly, Golden State homeowners can expect to pay a bit more than the typical U.S. homeowner. Californians spend an average of $16,957 per year on home maintenance, the seventh most in the country and the highest of any Western state.
And anyone who has purchased home in the exclusive Silicon Valley community of Atherton — America’s most-expensive ZIP code as of last fall — can expect sticker shock when it comes to maintenance, too. There, the average homeowner spends an average of $27,242 each year on home upkeep, the most in California and the third-highest in the nation.
Los Angeles presents a study in contrasts when it comes to home-maintenance spend. The city’s 90077 neighborhood, which includes Bel Air, is not far behind Atherton, with owners paying an average of $26,474 each year on regular maintenance jobs. Close by in zip code 90073, owners spend less than half that, at $12,746 each year, the lowest in California.
On a final note, home shoppers considering a property with a swimming pool should take note of the amount of money it will take to keep it operational. Replacing a pool’s filter system is by far the most expensive maintenance chore, costing an average of $1,786 every 2.3 years. And cleaning a pool is the most frequently required maintenance task, which happens every 1.9 months, for an annual total of $649.