Real Estate Roundup: California Claims One-Third of the 20 Fastest-Growing U.S. Luxury Housing Markets

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

FOUR BAY AREA COUNTIES SEE LUXURY HOME PRICES RISE BY MORE THAN 10 PERCENTAn aerial view of a mansion in the Holmby Hills section of Los Angeles
Demand for luxury homes remained strong nationwide this summer, with California counties accounting for a substantial portion of the markets where prices are growing the most.

That’s according to research from realtor.com, which ranks the top 20 U.S. housing markets for annual appreciation at the luxury price point, defined as the top 5 percent of residential properties. In Santa Clara County, luxury home prices increased by 14.5 percent year over year in June, making it the country’s third fastest-growing high-end market. A luxury home in Santa Clara County commanded $2,844,000 as of June.

Sonoma County‘s luxury home price rose by 13.3 percent from June 2017, while prices climbed by 12.2 percent in San Mateo County and 10.3 percent in San Francisco. Those latter two counties had the most expensive luxury homes of any city included on the list, a respective $3,505,000 and $3,313,000. The other California counties that rank among the country’s fastest-appreciating luxury markets: Santa Cruz (13.0 percent growth), Sacramento (10.0 percent growth) and San Luis Obispo (9.5 percent growth).

Realtor.com also tracks the 20 fastest-moving luxury markets, five of which are in the Golden State: Contra Costa County (53 days), Alameda County (59 days), Santa Clara County (60 days), Sacramento County (67 days), and Los Angeles County (68 days).


EAST BAY CITY NAMED AMONG THE TOP 5 U.S. PLACES TO BUY A HOME BIG ENOUGH FOR A FAMILY
Earlier this month, a study found that Alameda County’s Fremont is one of the best places in America to raise a family, and now another report says that it is also one of top places to buy a home big enough to accommodate a clan.

A new analysis by SmartAsset ranks the top 20 U.S. cities in which to buy a home large enough to raise a family on a 100-point scale based on six criteria: five-year change in home value, percentage of homes with at least two bedrooms, property-tax rates, change in rental costs, percentage of housing-cost-burdened homeowners, and housing costs compared with household income. Fremont ranks No. 5 on the list of places to buy a family-friendly home, with an overall score of 87.47.

Between 2012 and 2016, home prices in Fremont increased by 51 percent, and nearly 90 percent of homes in the city have at least two bedrooms. During that time, SmartAsset notes that rental costs in Fremont rose by 34 percent, which the company says means that renters are missing out on an opportunity, even though home prices in the city are relatively expensive compared with other housing markets included on the list.


U.S. HOME PRICES HAVE BEEN RISING FOR SIX-AND-A-HALF YEARS STRAIGHT
Although the number of U.S. homes for sale in August increased moderately from one year earlier, there are still not enough properties to meet demand, causing prices to continue their climb and homes to sell at a brisk pace.

The National Association of Realtors’ latest existing-home sales report puts the median price for all properties at $264,800 last month, an annual increase of 4.6 percent and the 78th consecutive month of year-over-year gains. There were 1.92 million existing homes on the market, up from 1.87 million at the same time in 2017, while the monthly supply of inventory rose from 4.1 to 4.3 on an annual basis.

Homes typically sold in 29 days, with more than half of them finding a buyer in less than a month. In a statement accompanying the report, NAR Chief Economist Lawrence Yun said that the nation’s inventory shortage is driving the pace of sales and that new-home construction is insufficient to satisfy the number of Americans who wish to purchase real estate.


MOST HOMEBUYERS START BY DOING THEIR OWN FINANCING RESEARCH
About three-quarter of prospective homebuyers are investigating financing before they do anything else, with first-timers even more likely to do their homework in advance.

Survey results from loanDepot and mellohome found that 73.5 percent of all homebuyers and 85.1 percent of first-time buyers are weighing financing options before they begin their search. In a statement accompanying the report, mellohome CEO Chris Heller noted that this trend is a big change from a decade ago, when buyers would typically have their real estate professionals do the finance-research legwork for them.

Buyers are likely doing their due diligence so that they can compete in a tight market, with more than two-thirds of respondents reporting difficulty finding a suitable home. Nearly that many said that coordinating mortgage paperwork was problematic, underscoring results from a recent Fannie Mae poll, in which 66 percent of Americans said that they would prefer that the entire process of obtaining a mortgage be conducted online.

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California’s August Job Gains Are Another Win

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  • August was another solid month for job additions in California, with employers creating 44,800 positions. In addition, California’s unemployment rate remained at 4.2 percent, maintaining a historic low for the fifth consecutive month, according to the latest numbers from the state Employment Development Department.
  • The August increase was more than two-and-a-half times the gain seen over the last two years, confirming 2018’s strong labor market. In the last year, California has added a total of 348,900 jobs.
  • Considering the robust job increases recorded over the summer, California’s 2.1 percent employment growth is again trending above the national rate of 1.6 percent.
  • While job additions were solid, the state’s unemployment rate was unchanged, as labor-force growth continued to hold back employers. Over the last year, the state’s labor force has shrunk by 0.4 percent. With notable labor shortages, California employers may be pressed to move operations elsewhere in search of more workers.
  • In August, eight sectors added jobs, led by an 18,800 increase in the educational and health services sector, followed by a 7,700 gain in professional and business services and a 6,100 increase in government jobs. The construction industry rebounded from last month’s losses, creating 5,200 jobs. The manufacturing and mining and logging sectors reported declines.
  • Over the past year, nine of California’s 11 major industries have added jobs. The top three gaining industries were educational and health services, with about one-fifth of total jobs added, followed by professional and business services and leisure and hospitality. In total, those three sectors created about 60 percent of all jobs. While the mining industry is back in positive territory on an annual basis, the largest losses were in other services, down by 1,100 jobs from last year.
  • All California metropolitan areas again saw employment rise over the past three months.
  • San Francisco and San Mateo counties added 2,800 jobs from July, and the unemployment rate dropped to 2.3 percent in August. From July, public-educational services saw the largest growth in jobs as schools returned to session. The finance and insurance industries, along with real estate and rental and leasing, were the second-largest contributors to August’s job growth. After many months of employment gains, the leisure and hospitality sector saw significant payroll losses, along with other services. Over the year, the professional and business services sector was the fastest-growing industry, with 10,000 jobs added, though the information sector had another strong month of 4,100 job additions. The other industries that created jobs include educational and health services — particularly jobs in health care and social assistance. The other services and trade, transportation, and utilities industries posted employment losses.
  • Santa Clara and San Benito counties added 3,200 jobs in August, with most coming in public- and private-education services. The professional and business services sector also posted gains — mostly in administrative and support services. The finance and insurance industries reported losses. Over the year, the two counties created 33,500 jobs, with education and health services leading the pack. The manufacturing, professional and business services, and information sectors reported solid annual increases. Other industries with gains of more than 1,000 jobs include construction, government, and financial activities.
  • Alameda and Contra Costa counties added 4,800 jobs, with most coming from the trade, transportation, and utilities sector. The health care and social assistance, other services, financial activities, and professional and business services industries posted gains, while manufacturing and construction reported losses. Over the year, the two job-gain leaders have been professional and business services and trade, transportation, and utilities, though other major industries have posted substantial additions as well.
  • Marin County’s unemployment rate dipped to 2.4 percent in August, with 1,000 jobs added from July and 3,200 new jobs from the same time last year. On an annual basis, most jobs gained in Marin County were in the educational and health services sector, followed by construction and trade, transportation, and utilities.
  • Sonoma County’s unemployment rate declined to 2.7 percent, and the region posted a gain of 2,500 jobs since July and 4,700 year over year. In August, most of the gain was in the government sector, followed by manufacturing. Over the year, the educational and health services industry created twice as many jobs as manufacturing, the second-largest gaining sector. The professional and business services, financial activities, and government industries reported the biggest losses.
  • Napa County’s unemployment rate decreased to 2.8 percent in August, with 300 jobs created from July and 100 additions year over year. Annual gains were driven by the leisure and hospitality sector, while the losses stemmed from manufacturing and trade, transportation, and utilities.
  • Los Angeles County added 23,500 jobs in August, with the unemployment rate unchanged at 4.5 percent. In August, the professional and business services sector led gains in all industries, with administrative and support and waste services accounting for 85 percent of the increase. Health care and social services reported strong growth, but educational services showed losses. The motion-picture and sound-recording industries drove most of the gain in the information sector. The accommodation and food services and arts, entertainment, and recreation industries reported losses. Over the year, Los Angeles County added a total of 62,000 jobs, a 1.4 percent gain, but still lags the Bay Area in employment growth rate and gains in higher-paying industries. The leisure and hospitality industry continues to lead the annual employment gains.
  • The second-largest increase in Los Angeles County was in the health care and social-assistance sector, followed by administrative and support; waste services; and professional, scientific, and technical services. The information industry also posted a solid gain, with more than 70 percent of new jobs coming from the motion-picture and sound-recording sector. The government sector posted losses, with most of the reductions coming from government education.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

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Which California Neighborhoods Are Millennials Flocking To?

  • Downtown Los Angeles’ Historic Core neighborhood saw its millennial population nearly double between 2011 and 2016, the highest rate of growth in the U.S.
  • In San Francisco, The Castro and Glen Park are among the top 20 neighborhoods in America to experience the largest millennial population growth.
  • More than 30,000 millennials live in Los Angeles’ South Park neighborhood and San Francisco’s Mission Bay.

Millennials walking in a cityThe Golden State is home to the nation’s largest share of millennials, and they are gravitating toward Downtown Los Angeles and neighborhoods in southeastern San Francisco.

Between 2011 and 2016, Los Angeles’ 90014 ZIP code, also known as the Historic Core, saw its millennial population increase by 91.4 percent, the most of any area in the 30 largest U.S. cities included in an analysis by RentCafe. During that time period, 3,300 millennials — defined here as those born between 1977 and 1996 — moved to that part of Downtown Los Angeles, which the company identifies as America’s fastest-gentrifying neighborhood since the turn of the century.

Millennials are also beginning to gentrify Los Angeles’ 90013 ZIP code, otherwise known as Skid Row. That neighborhood had the nation’s second-largest increase in millennial residents in the five-year period — 60.0 percent, which translates to 4,700 people.

Two San Francisco ZIP codes rank in the top 20 for millennial population growth: 94114 (The Castro) and 94131 (Glen Park). The former enclave saw 37.4 percent (12,500 people) more millennials set up shop, while the latter posted a 35.5 percent increase (9,000 people).

San Francisco’s booming Mission Bay neighborhood ranks among the top 20 U.S. neighborhoods with the largest share of millennials, where 3,800 residents of that age group comprise nearly two-thirds of the population. Millennials who call Mission Bay’s 94158 ZIP code home are almost certainly earning handsome paychecks; according to a separate RentCafe analysis, it’s the second most expensive neighborhood in the Bay Area for renters, with monthly payments averaging $4,336.

New York and Chicago ZIP codes dominate the rankings of the 20 U.S. places where the most millennials live, but two Golden State neighborhoods make the list. In Los Angeles, 33,500 millennials reside in the 90011 ZIP code (South Park, just south of Downtown), while 30,500 live in 94110 in San Francisco’s Inner Mission.

Despite the Bay Area’s sky-high home prices, millennials have gained a surprisingly large foothold in the real estate market. According to a February analysis of Pacific Union data by Chief Economist Selma Hepp, homebuyers aged 35 and younger accounted for more than one-third of purchases in San Francisco and Silicon Valley between August 2017 and January 2018.

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California: America’s Most Diverse State in 2018

  • A new study names California as the most diverse state in the U.S., scoring a 70.89 on a 100-point scale based on six major criteria.
  • California ranks as the most culturally diverse state in the country.
  • A separate study released in the spring ranked Los Angeles and Long Beach among America’s 10 most diverse cities.

A group of peopleThe United States is a nation that was built on embracing diversity, and nowhere exemplifies this most American of principles more than California.

That’s according to a new analysis from WalletHub, which ranks all 50 U.S. states for diversity on a 100-point scale based on six major criteria: socioeconomics, culture, economy, households, religion, and politics. The subcriteria that the company uses to measure diversity include factors such as educational attainment, generational mix, and range of industries and occupations.

By WalletHub’s measures of diversity, California ranks No. 1 in the nation, with a total score of 70.89.  Within the six major criteria, the Golden State is also No. 1 for cultural diversity and No. 3 for socioeconomic factors, which encompass household income and education levels.

California has the highest level of linguistic diversity in the country.  The state ranks second in America for ethnic, religious, household-size, and educational-attainment diversity.

The Golden State’s ranking is also boosted by its economy, which WalletHub call’s the country’s third most diverse. And while California’s powerhouse of an economy is most often associated with the high-tech sector, a recent SmartAsset study found that the state’s fastest-growing industry between 2015 and 2016 was actually transportation and warehousing, particularly tourism transportation.

In a separate analysis released earlier this year, WalletHub ranked four California cities among America’s most diverse: Los Angeles (No. 7), Long Beach (No. 9), San Jose (No 16), and San Diego (No. 19).

So why is diversity beneficial to American society? WalletHub asked a panel of professors, one of whom pointed out that a diverse society theoretically means a wider array of skill sets among employees, which leads to higher levels of entrepreneurship. Also, research has supported the idea that diverse populations tend to be more cohesive than those that are more homogeneous.

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California Home Listings Improved for the Fifth Straight Month in August

  • There were 17.2 percent more active home listings in California in August than there were at the same time last year.
  • The median sales price for a single-family home in the state ended the month at $596,410, up by 5.5 percent year over year.
  • The nine-county Bay Area’s median sales price was $935,000, up by 10.0 percent from August 2017 for the 14th consecutive month of annual gains.

The number of active listings in the Golden State rose by more than 15 percent year over year in August, though prices continued to increase in every major region of the state, with the nine-county Bay Area posting the largest gain.

The latest existing home sales and price report from the California Association of Realtors says that active listings increased by 17.2 percent from August 2017, the fifth consecutive month of supply improvement. The median sales price for a single-family home was $596,410, a gain of 0.8 percent from July and an increase of 5.5 percent from one year earlier.

“While home prices continued to rise modestly in August, the deceleration in price growth and the surge in housing supply suggest that a market shift is underway,” CAR Senior Vice President and Chief Economist Leslie Appleton-Young said. “We are seeing active listings increasing and more price reductions in the market, and as such, the question remains, ‘How long will it take for the market to close the price expectation gap between buyers and sellers?’”

The Bay Area’s median sales price ended August at $935,000, an annual gain of 10.0 percent for the 14th straight month of double-digit- percent, year-over-year price growth. Prices rose from August 2017 in all nine counties, ranging from 1.3 percent in Marin to 12.6 percent in Santa Clara.

As in July, San Francisco was California’s most expensive housing market, with a median sales price of $1,550,000. The Bay Area is also home to the state’s other three counties with seven-digit price tags: San Mateo ($1,500,000), Santa Clara ($1,295,000), and Marin ($1,222,500). CAR notes that while California buyers paid an average of 99 percent of list price in August, those in nearly every Bay Area counties forked over premiums due to tight supply conditions.

Even if inventory shortages dictate that California and Bay Area housing market conditions remain tilted toward sellers, supply conditions improved from August 2017. Statewide, the months’ supply of inventory was 3.3, unchanged from July but up from 2.9 on an annual basis. The nine-county Bay Area had a 2.3-month supply of inventory, up from 1.9 at the same time last year.

Every Bay Area county posted year-over-year inventory gains except for Marin and Napa. Alameda and Santa Clara counties had the state’s most severe inventory droughts, both with a 2.0-month supply, while only Napa and Sonoma counties had more homes for sale that the statewide average.

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Real Estate Roundup: Silicon Valley Homes Are Selling at the Nation’s Fastest Clip

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

BAY AREA HOMEBUYERS ARE ADVISED TO ACT FAST THIS FALLA street scene in Downtown San Jose, California
Intense demand for Bay Area real estate amidst a booming job market means that homes have been selling at a brisk pace for the past few years, and that trend continues as summer 2018 nears its end.

Data from the National Association of Realtors says that U.S. homes sold in a median 27 days in July, three days quicker than they did one year ago. Homes sold faster than they did last year in 76 percent of the 500 U.S. metropolitan areas for which NAR tracks data.

Homes in the San Jose metropolitan area sold in a median 26 days, four days quicker than they did in July 2017 and the briskest pace in the country. San Francisco tied Seattle as the nation’s second-fastest-moving housing market, with homes finding a buyer in 30 days, also quicker than last year. While Vallejo also ranked among the country’s fastest-paced markets this summer, at 36 days, homes there sold slower than they did at the same time last year.

Bay Area homes continued to move quickly in August, selling in as few as 21 days in the East Bay. For more on the latest market conditions, check out Pacific Union’s August 2018 Real Estate Update.


MORE ADVICE FOR BAY AREA HOMEBUYERS: SAVE A HEFTY DOWN PAYMENT
While Bay Area homebuyers who want to close a deal should act quickly given current market conditions, they should also be prepared to place a substantial down payment — in fact the most in the nation.

ATTOM Data Solutions’ latest Residential Property Loan Origination Report puts the median U.S. down payment at $19,900 in the second quarter, representing 7.6 percent of the median sales price of properties with a mortgage and a new all-time high. In the San Jose metro area, homebuyers put down more than 15 times the national average — $306,000, which accounted for 25.5 percent of the median-priced $1,201,250 home. San Francisco followed with America’s second-highest down payment of $220,000, representing 23.9 percent on a $922,000 home.

Because of the Bay Area’s big-ticket home prices, the region also has the highest percentage of sales to co-borrowers — multiple, nonmarried parties named on the deed. In San Jose, co-borrowers accounted for 49.3 percent of sales, while they comprised 39.1 percent of activity in San Francisco.


BAY AREA LEADS THE COUNTRY FOR APPRECIATION SINCE HOUSING MARKET RECOVERY
Home prices in key Bay Area job centers have more than doubled in value over the past six years, fueled by a high-octane economy and not enough homes to meet demand.

Citing data from Trulia, The Mercury News reports that home prices in San Jose have grown by 122 percent since 2012, the highest rate of appreciation in the country. During that time, home prices rose by 108 percent Oakland and 101 percent in San Francisco, ranking those cities No. 3 and No. 4 for appreciation.

Bay Area home prices have risen on an annual basis every month since April 2012. A lack of new homes is fueling the increase, and while The Mercury News notes that building permits have recently ticked up, they remain significantly below the U.S. average.


CALIFORNIA’S FASTEST-GROWING INDUSTRY IS NOT WHAT YOU WOULD THINK
While the Golden State’s economy is typically strong associated with the technology sector, its fastest-growing industry is actually rooted in tourism.

That’s according to an analysis by SmartAsset, which tracked the number of employees in 13 job sectors in 2015 compared with 2016 to find out which industries are growing the most in every state. During that period, California’s highest-growth industry was in transportation and warehousing sector — specifically scenic and sightseeing transportation.

When it comes to the information sector, the places that added the most software-development jobs include some unlikely states, including Arkansas, Maine, and Missouri.

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Another Survey Highlights the Importance of Schools in the Homebuying Process

  • Half of Americans with children say that the quality of the school district is important when shopping for a home, compared with only about 10 percent of those without kids.
  • More than one-quarter of homebuyers who have kids delayed a real estate purchase because of child-care expenses.
  • Regardless of whether they have children, 87 percent of all homebuyers employed the services of a real estate professional.

Survey results released earlier this summerA group of schoolchildren standing in front of a bus with a teacher showed that nearly 80 percent of recent homebuyers sacrificed some amenities to purchase a property in their desired school district, and now another poll echoes the importance of education in the real estate decision-making process.

The National Association of Realtors’ 2018 Moving With Kids Report found that 50 percent of homebuyers with children under the age of 18 said that the quality of the school district was important when shopping for a home, compared with just 11 percent of those without kids. Similarly, 45 percent of families prioritized convenience to schools when purchasing a home, while only 6 percent of childless buyers did the same.

Perhaps because of school schedules, buyers with children showed more urgency than those without when selling their current home. More than one-quarter of families said that they were in a rush to unload their home, compared with 14 percent of homeowners without children.

Both buyers with and without children prefer detached, single-family residences, but the former group predictably wants more room than the latter — four bedrooms and 2,100 square feet of living space. In fact, the need for more space was the biggest reason that families said they sold their homes, cited by 24 percent of those surveyed.

Child care expenses caused 27 percent of homebuyers with kids to delay a real estate purchase. The cost of caring for kids also forced families to make substantial sacrifices when making a final real estate decision; about 30 percent compromised on the home’s size and price, while 22 percent gave up proximity to work and the home’s condition and architectural style.

Even if homebuyers with and without kids have different preferences and constraints when choosing a neighborhood and a home, there are a couple of points where both groups are exactly alike. Fifty-four percent of families and households without children said that finding the right home was the most difficult part of the process, likely a byproduct of the nation’s ongoing housing inventory crunch. And 87 percent of both groups employed the services of a real estate professional to help them navigate the process, with referrals from family members or friends the most common method of locating a professional.

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What Do Americans Want in Their Ideal Home?

  • More than half of all Americans would prefer to buy a new home.
  • Waterfront homes are the most popular with buyers, while properties near golf courses are the least.
  • Nearly 80 percent of Americans say that their ideal home includes central air conditioning.

An oceanfront home in Malibu, California.While a home’s perfect location, size, and amenities are unique to each buyer’s personal situation and budget, about half of respondents to a recent survey are agree on a few key points.

That’s according to a poll conducted by Porch.com, which asked both Americans and Europeans to describe their perfect home. About 54 percent of both nationalities state a preference for a new home, and 51 percent think a suburban property is ideal.

Roughly half of Americans and Europeans believe that a waterfront location is perfect for a home, followed by about one-third who want a view of the coast, a city, or hills. The least-popular location is near a golf course, cited by less than 4 percent of both Americans and Europeans. That latter trend should come as little surprise, considering that golf is losing popularity with millennials and other younger Americans.

The classic ranch-style home is the No. 1 choice for both Americans and Europeans. Craftsman-style and Mediterranean homes are also popular with both groups, though Europeans are more likely to prefer Art Deco homes, which Americans put at the bottom of the architecture-style list.

Brick is the preferred construction material for Americans, with 27 percent saying it is part of an ideal home. Similarly, nearly 30 percent voice a preference for composition shingles for the roof.

Inside the home, 42.1 percent of American respondents said that granite kitchen counter tops are ideal, and 30.1 percent want tile floors in the that room. Nearly half prefer that the rest of home have wood floors, though 40 percent feel that carpet is the best flooring material in a bedroom.

When it comes to home amenities, Americans overwhelmingly want central air conditioning, cited by nearly 80 percent of those surveyed. About two-thirds think that an ideal home has a deck and a laundry room, and 60 percent point to a finished basement and solar panels as key features.

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Rising Housing Costs Hit the Bay Area’s Most-Affordable Communities the Hardest

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Executive Summary:

  • Bay Area home sales decreased by 11 percent year over year in August, the second-largest decline following June’s 10 percent drop, dragging year-to-date sales down by 2 percent.
    • Marin and Napa counties, however, saw increased sales — a positive reversal from previous months.
    • Homes sales slowed notably in Alameda and Contra Costa counties compared with previous months of strong growth.
    • Sales of homes priced between $2 million and $3 million came to a screeching halt in August.
  • Inventory continued to improve, up by 5 percent from August 2017 after 16 consecutive months of year-over-year declines.
    • Eighty percent of the supply increase came from more inventory in Santa Clara County, followed by Sonoma and Alameda counties.
    • Other counties also had slightly more inventory except for San Francisco.
    • Most of the increase in inventory was for homes priced between $1 million and $2 million.
  • The Bay Area’s median home price rose by 12 percent on an annual basis. Santa Clara County continued to post nearly double that rate of appreciation, with prices up by 21 percent year over year.
  • Slowing price growth that started in the spring continued in all Bay Area counties except Napa.
    • Slowing price growth was most notable in Santa Clara County, followed by Marin and Contra Costa counties.
  • Absorption rates continued to decline in Silicon Valley and Marin County, followed by Sonoma County.
  • Overall, Bay Area absorption rates continued to trend lower, falling from 43 percent last August to 37 percent now but in line with August 2016.
  • Santa Clara County posted the largest absorption-rate decline, followed by Alameda and Sonoma counties. Price reductions also rose, from 15 percent last August to 19 percent today.
  • Affordability concerns are impacting budget-constrained buyers, especially in Sonoma County.

August home sales activity in the Bay Area posted another notable decline from a year ago, with sales down by 11 percent and across most counties. With the substantial August decline, year-to-date sales are now 2 percent below last year. Marin and Napa were the only two counties that saw sales increase from last year, which is a positive improvement from declines recorded in previous months. Alameda, Contra Costa, and San Francisco counties, which were faring relatively better this year, also posted sales declines in August, with activity in Alameda down by 13 percent and sales in San Francisco down by 4 percent.

Sales of homes priced above $1 million also posted slower growth than earlier in the year, up by 8 percent from last August. Nevertheless, sales of homes priced between $2 million and $3 million came to a screeching halt in August after 18 consecutive months of year-over-year increases. Almost the entire decline came from the drop of sales in that price range in Santa Clara County. Other counties, particularly San Francisco, continued to post more sales of homes priced between $2 million and $3 million. By contrast, sales of homes priced between $1 million and $2 million and above $3 million continued trending higher than last year.

Figure 1 summarizes August year-over-year home sales changes by county and by price ranges. Contra Costa was the only county where declines in sales spread across all price ranges. In Marin County, the previous two months of declines in sales of homes priced less than $3 million reversed in August and showed improvement over last year. Also, San Francisco and San Mateo counties continued to show strong growth in all price ranges in which inventory was available. Lastly, sales of homes priced higher than $3 million showed slower increases or declines in some areas after three months of solid improvement.

Figure 1: August year-over-year home sales changes by Bay Area County and price range

Source: Terradatum, Inc. from data provided by local MLSes, Sept. 7, 2018

Figure 2 illustrates the three-year trend in sales of homes priced $3 million and higher, with activity peaking in May at 255 sales. Even with the slower increase in August, year-to-date sales are 32 percent above last year, with all counties except Marin and Napa seeing strong increases. Marin County has generally had a comparably slower increase in sales activity since the beginning of 2018 than other counties, while Napa is the only county to register an overall decline compared with last year.

Figure 2: Number of $3 million-plus home sales in the Bay Area since January 2015.

Source: Terradatum, Inc. from data provided by local MLSes, Sept. 7, 2018

Bay Area inventory conditions continued to improve in August, marking the second straight month of year-over-year increases. Eighty percent of the overall 5 percent supply increase came from Santa Clara County, followed by Sonoma and Alameda counties. In Santa Clara County, inventory rose by 20 percent, while Sonoma and Alameda counties saw supply increase by a respective 15 percent and 7 percent. The other counties either showed a small increase or a decline. San Francisco continued to post a large annual decline in the number of homes for sale. Figure 3 summarizes inventory changes by region and price range. The buildup in inventory was primarily in the $1-million-to-$2 million range in Santa Clara and Alameda counties, though a few other counties saw some gains. Overall inventory was up by 20 percent for $1-million-to-$2 million homes, up by 12 percent for $2-million-to-$3-million homes, and up by 4 percent for homes priced higher than $3 million. The most affordable inventory continued to decline in all regions but Sonoma County, where the supply of homes priced below $1 million increased by 23 percent.

Figure 3:  August annual changes in inventory by Bay Area county and price range

Source: Terradatum, Inc. from data provided by local MLSes, Sept. 7, 2018

Figure 4 breaks down inventory changes by ZIP code, with red and orange indicating declines and yellow and green indicating increases from last August. For example, green areas suggest an increase between 26 and 77 units compared with last August. Thus, although Sonoma County posted an overall increase in inventory, much of the gain was in the northern part of the county, while Sonoma Valley continued to see large supply declines. Areas with larger increases in inventory — more than 50 units per ZIP code — include communities around south San Jose, Saratoga, Milpitas, Fremont, parts of Oakland, Danville, Livermore, and Dublin. In Sonoma County, most of the increase was in Santa Rosa, which was largely impacted by last fall’s wildfires.

Figure 4: Year-over-year inventory changes by ZIP code

Source: Terradatum, Inc. from data provided by local MLSes, Sept. 7, 2018

Nevertheless, despite slower sales activity and more inventory, home prices continued to increase. In August, the Bay Area’s median prices rose by 12 percent year over year, consistent with the previous month’s increase. Santa Clara County’s median price continued to grow at almost twice the rate of any other region, up by 21 percent from August 2017.

Figure 5 summarizes August median prices by Bay Area county, price changes from last August, and difference in median price growth between March and August.

In March of this year, appreciation hit a two-year high, with the Bay Area’s median price up by 19 percent year over year. Since March, median price growth has slowed to 12 percent annual growth. The only county where price growth has accelerated since March is Napa, where 2018 got off to a slow start but has since picked up. The fourth column in Figure 5 summarizes where changes from March have been the most notable. Despite still showing solid appreciation, Santa Clara County has seen prices slow the most, down from a 35 percent annual increase in March. Marin and Contra Costa counties followed, declining from a respective 15 percent and 10 percent annual growth rate in March. In contrast, Alameda and Sonoma counties have posted the smallest declines in growth since March.

The last column in Figure 5 summarizes year-to-date median price changes by county. Overall Bay Area home prices are up by 15 percent from the same period last year. Year-to-date price increases range from 6 percent in Napa County to 27 percent in Santa Clara County.

Figure 5: Median home prices and changes by Bay Area county

Source: Terradatum, Inc. from data provided by local MLSes, Sept. 7, 2018

Finally, other housing-demand indicators suggest that trends that developed over the summer remained consistent in August. Absorption rates declined on an annual basis, from 43 percent last August to 37 percent now. Nevertheless, as noted in previous analyses, this summer’s market conditions were similar to those recorded in the summer of 2016. It appears that 2017 was the peak of the market demand. Again, absorption rates declined the most in Santa Clara County, down by 16 percentage points, from 55 percent last August to 39 percent today. Alameda and Sonoma followed in absorption-rate declines. On the other hand, San Francisco and Napa counties gained absorption momentum, with respective 6 percentage point and 3 percentage point increases from last year. Buyers of homes priced below $1 million are increasingly hitting their ceilings, with absorption rates dropping by almost twice as much as for higher-priced homes.

Similarly, price reductions are picking up, from 15 percent last August to 19 percent now, with most of the increase coming from Santa Clara County, followed by San Mateo County. However, as anticipated, affordability concerns are impacting budget-constrained buyers the most, with relatively larger reductions occurring for homes priced below $1 million and especially in Sonoma County.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

(Promotional photo: iStock/AntonioGuillem)

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Shared with permission from the Pacific Union Blog

Pacific Union’s August 2018 Real Estate Update

The median sales price rose year over year in August in every Northern California region in which Pacific Union operates, ranging from less than 1 percent in Marin County to more than 15 percent in Silicon Valley. Single-family home prices in Napa County reached a one-year high, climbing to $745,000.

Click on the image accompanying each of our regions below for an expanded look at local real estate activity in August.

CONTRA COSTA COUNTY

Contra Costa County‘s median sales price was $1,302,500 in August, up by 6.3 percent on an annual basis. Homes sold in an average of 26 days, identical to the pace of sales in August 2017.

Click the image to the right to see these and other Contra Costa County market statistics for August.

Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales data in the adjoining chart includes single-family homes in these communities.


EAST BAY

Homes in the East Bay sold in an average of 21 days in August, faster than anywhere else in the Bay Area. The median sales price ended the month at $1,192,o00, up by 11.1 percent year over year.

Click the image to the right to see these and other East Bay market statistics for August.

Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales data in the adjoining chart includes single-family homes in these communities.


MARIN COUNTY

Marin County‘s median sales price has been steadily declining throughout the summer and was $1,225,000 in August, nearly identical to one year ago. Homes sold for $685 per square foot and for 97.9 percent of original price, also mostly unchanged from August 2017.

Click the image to the right to see these and other Marin County market statistics for August.

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. Sales data in the adjoining chart includes single-family homes in these communities.


NAPA COUNTY

At $745,000, home prices in Napa County reached a yearly high in August. Buyers took an average of 60 days to close a deal, two weeks faster than they did one year earlier.

Click the image to the right to see these and other Napa County market statistics for August.

Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the adjoining chart includes all single-family homes in Napa County.


SAN FRANCISCO – SINGLE-FAMILY HOMES

The median sales price for a single-family home in San Francisco ended August at $1,575,000, the lowest since January but still up by more than 14 percent year over year. Sellers received an average of 110.1 percent of original price, almost exactly the same as they did in August 2017.

Click the image to the right to see these and other San Francisco single-family home market statistics for August.

Defining San Francisco: Sales data in the adjoining chart includes single-family homes in San Francisco County.


SAN FRANCISCO – CONDOMINIUMS

There were just more than 550 San Francisco condominiums for sale in August, an annual decline of about 18 percent. The median sales price was $1,275,000, up on both a monthly and yearly basis.

Click the image to the right to see these and other San Francisco condominium market statistics for August.

Defining San Francisco: Sales data in the adjoining chart includes condominiums in San Francisco County.


SILICON VALLEY

Home prices in Silicon Valley rose by 15.2 percent year over year to end August at $3,400,000, making it the Bay Area’s fastest-appreciating and most expensive real estate market. Homes sold in an average of 22 days, nine days faster than they did at the same time last year.

Click the image to the right to see these and other Silicon Valley market statistics for August.

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the adjoining chart includes all single-family homes in these communities.

Mid-Peninsula Subregion

For the first time since February, the Mid-Peninsula‘s median sales price dipped below the $2 million mark, but at $1,900,000, it was up by nearly 10 percent since August 2017. Inventory improved on an annual basis, with about 15 percent more homes on the market.

Click the image to the right to see these and other Mid-Peninsula market statistics for August.

Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales data in the adjoining chart includes all single-family homes in these communities.


SONOMA COUNTY

The median sales price for a Sonoma County property was $669,500 in August, up both month over month and year over year. Buyers paid 96.7 percent of original price, in line with trends observed over most of the last year.

Click the image to the right to see these and other Sonoma County market statistics for August.

Defining Sonoma County: Sales data in the adjoining chart includes all single-family homes and farms and ranches in Sonoma County.


SONOMA VALLEY

Sonoma Valley‘s median sales price ended August at $805,000, a year-over-year gain of 15 percent. The number of properties for sale was down by 19 percent from August 2017.

Click the image to the right to see these and other Sonoma Valley market statistics for August.

Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the adjoining chart refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.


LAKE TAHOE/TRUCKEE – SINGLE-FAMILY HOMES

The median sales price for a single-family home in the Lake Tahoe region was $750,000 in August, up by more than 10 percent on an annual basis. Buyers paid $538 per square foot, 17 percent more than they did at the same time last year.

Click the image to the right to see these and other Lake Tahoe/Truckee single-family home market statistics for August.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes single-family homes in these communities.


LAKE TAHOE/TRUCKEE – CONDOMINIUMS

At $430,000, the median sales price for a Lake Tahoe condominium was nearly unchanged from August 2017. There were 13.3 percent fewer units for sale than there were at the same time last year.

Click the image to the right to see these and other Lake Tahoe/Truckee condominium market statistics for August.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes condominiums in these communities.

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Shared with permission from the Pacific Union Blog