August Newsletter – Housing Market Updates for the Greater Bay Area
A note on the data: We utilize data from the California Association of Realtors®, which provides an incredibly rich data set. In an effort to bring you these reports in a timely manner, for the month of August, we are using June’s numbers to analyze market trends over the first half of the year.
Single-family home prices climbed higher as inventory waned. The condo market saw a noticeable increase in median price and looks to be rebounding. Year-over-year, single-family home prices are up 4% from this time last year. The Bay market as a whole has fared well throughout the pandemic with year-over-year prices dipping briefly in April and May for single-family homes. As we dive deeper into the county data, we see that single-family homes in all counties posted gains year-over-year. Median condo prices posted mixed results with counties farthest from the major economic centers recording the largest gains, including Napa, Solano, Marin, and Santa Cruz. In the markets with more density and condos, prices struggled, particularly in Santa Clara where prices fell by double digits. Active inventory of homes for sale increased to the highest levels this year in May and has since decreased slightly since. With demand high and supply decreasing, we expect the year-over-year median price changes to remain positive. The Bay’s prices tend to be buoyed by lack of supply compared to demand, which still remains true. We believe that the current supply of near 17,500 homes for sale allows markets to run efficiently. Buyers have plenty of options to find what they actually want, leading to more sales. We can look to Months of Supply Inventory (MSI)—the measure of how many months it would take for all current homes for sale on the market to sell at the current rate of sales—as a proxy for demand. MSI has an average of three months in California. An MSI lower than three means that buyers are dominating the market and there are relatively few sellers; a higher MSI means there are more sellers than buyers. The MSI for single-family homes fell below the three-month mark and now favors sellers once again.
MSI rose for all counties year-over-year with only two counties above three-months of supply, Sonoma and Napa.
The number of homes under contract continued to trend upward, which contributed to the falling MSI and highlights the demand in the Bay. Based on these metrics, we believe the housing market is thriving. We can also analyze home sales—the result of homes under contract that close within 30 days—on a monthly basis, while also comparing them to last year’s numbers. Sales are still down 13% year-over-year for single-family homes but are on an upward path. The Bay experienced large month-over-month gains, which is a remarkable recovery from the May low.
Sale-to-list ratios—which compare the prices buyers pay to the listed prices of homes—suggest that buyers are not paying large premiums. The chart below illustrates the price that the average Bay area buyer negotiated to put a property under contract, and whether or not it was above or below list price. In June, both single-family homes and condos sold in-line with original list prices. Single-family home and condo buyers can expect to pay around the listed price.
In summary, the difficulty that the housing market experienced in the second quarter, as evidenced by sales volume and supply, has subsided. The housing market has shown its resilience through the pandemic and remains one of the safest asset classes. Whether you are buying or selling a home, it is still incredibly important to seek out the advice of real estate experts.
Moving forward, we anticipate more sellers coming to market. The initial seller reticence caused by COVID-19 seems to have subsided. As more supply becomes available, there could be a small price correction in the market, but we do not believe that will occur during the summer months while demand is so high.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we have shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.