Compass Northern California Quarterly Report: Q4 2018

For the most
part, home price appreciation across the Northern California regions in which
Compass operates was moderate in the fourth quarter of 2018 compared with the
same period in 2017, with only single-family homes in the Lake Tahoe region
posting a double-digit-percent gain. Prices were unchanged for single-family
homes in Contra Costa County and San Francisco, while Sonoma County and Sonoma
Valley saw annual depreciation. The other regions put up single-digit-percent
year-over-year price increases.

Below, Pacific Union Chief Economist Selma Hepp offers a brief synopsis of fourth-quarter real estate activity in each of Compass’ Northern California regions. The accompanying links lead to the full report for each area, where you can access the latest regional and community-specific market data and statistics to help you make a better, more informed homebuying or selling decision.

Contra Costa County

Contra Costa County housing market activity in 2018 generally showed a slight improvement from the previous year, although fourth-quarter sales were disappointing there, as well as across the entire Bay Area. Sales were particularly slower for homes priced below $3 million, while activity for those over $3 million continued to show steady growth and almost doubled compared with last year’s fourth quarter.

At the same time, the
inventory declines that persisted throughout the previous 15-plus months
finally reversed in the fourth quarter, with most price ranges posting 10-plus-percent
increases except for homes priced between $2 million and $3 million. Buyers of
homes priced between $1 million and $2 million saw the largest increase in
options compared with last year. 

Despite more inventory,
buyers took a step back in the fourth quarter and were much less likely to
engage in bidding wars or pay more than the asking price than they were in the
past. Buyer reluctance led to more price reductions, and three in 10 homes sold
for less than asking price, up from two in 10 last year. The median sales price
was unchanged from the fourth quarter of 2017.

Looking Forward: More inventory and less competition may draw some buyers back into the
market, along with the relatively more favorable mortgage rates seen in recent weeks.
Still, affordability challenges remain, as do concerns over the housing
market’s direction, both of which are holding back potential buyers. 

Click here to read the full Q4 2018 Contra Costa County real estate report.


East Bay

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While the East Bay‘s housing market activity in 2018 showed a slight overall increase from the year before, the final quarter ended with a slower pace of sales compared with last year. Nevertheless, while overall sales trended lower, sales of homes priced between $1 million to $2 million maintained their 2017 momentum, while all other Bay area regions saw a decline in that price range.

The East Bay
also saw improved inventory compared with the fourth quarter of 2017, but
mostly for homes priced below $2 million. Higher-priced inventory continued to
trend below last year’s levels.  

Despite more
homes for sale, buyer fatigue settled in, and they were notably more reluctant
to engage in bidding wars, leading to a decline in the number of homes that
sold for more than asking price. As a result, sellers were more likely to
reduce their asking prices, with three in 10 homes selling at a discount
compared with only one in 10 homes last year. The pressure on median home price
growth eased and returned to a normalized level.

Looking Forward: The East Bay benefits from access to
transit and jobs, and the region’s relative affordability is reflected in the
steady sales of homes priced between $1 million and $2 million. Nevertheless, a
notable jump in mortgage rates in the second half of the year, as well as
market uncertainty, may continue to create buyer caution.

Click here to read the full Q4 2018 East Bay real estate report.


Marin County

While 2018 home sales activity in Marin County generally maintained a steady momentum, the pace of sales slowed in the fourth quarter, with most price ranges posting fewer transactions than at the same time last year. However, sales of homes priced between $2 million and $3 million posted a solid gain compared with the fourth quarter of last year. 

Meanwhile, the inventory of
homes for sale finally showed a steady increase in the second half of the year,
following a year and a half of annual declines. Most of the housing-supply gain
was for homes priced below $2 million, although higher price ranges also showed
improvement.

However, buyer trepidation
intensified amid uncertain political and economic events, financial market
volatility, and trade-war concerns. Buyers were far less likely to engage in
bidding wars — particularly for more affordable homes — and paid slightly
smaller premiums compared with the fourth quarter of last year. More sellers
sold their homes below asking price, and although price reductions were more
common than they were last year, Marin County sellers fared relatively well in
that regard compared with some other Bay Area housing markets. Consequently,
appreciation reversed from a rapid increase seen earlier in 2018, ending the
year with median prices 9 percent above 2017.

Looking Forward: While the jump in mortgage rates early in 2018 and the aforementioned
uncertainties held back some buyers, recent weeks showed favorable trends,
which may help restore confidence.

Click here to read the full Q4 2018 Marin County real estate report.


Mid-Peninsula

The year 2018 was a wild ride for buyers and sellers in the Mid-Peninsula. While the year started with strong buyer competition, rapid price growth and a severe lack of inventory, the fourth quarter was characterized by a reversal of those trends, and sales activity slowed from the same time last year, particularly for homes priced below $2 million. Overall, 2018 sales were up slightly from 2017, with activity above $2 million driving most of the increase.

Inventory in the region also
showed a solid year-over-year increase — mainly for homes priced below $3
million, while the inventory of higher-priced homes trended below last year’s
fourth quarter.

Buyer sentiment, which
started 2018 enthusiastically, changed in the middle of the year, leading to
more price reductions and longer times on the market, particularly in the last
quarter. Buyers were also less willing to engage in bidding wars, with five in
10 homes selling for premiums compared with seven in 10 last year. As a result,
the double-digit-percent median price growth that marked the first half of the
year normalized in the fourth quarter and returned to its long-term average.

Looking Forward: More inventory and less buyer competition may draw some house hunters
back to the market, along with the relatively more favorable mortgage rates
seen in recent weeks. Still, affordability challenges remain, as does buyer
concern over the housing market’s direction, which could curtail activity in
2019. 

Click here to read the full Q4 2018 Mid-Peninsula real estate report.


Napa County

While Napa County’s 2018 housing market activity improved from 2017, fourth-quarter sales slowed compared with the same period last year. Nevertheless, diminished overall activity was mostly due to notably fewer sales of homes priced between $1 million and $ 2 million, while lower-priced sales showed a relatively smaller decline and sales of homes above $2 million posted a solid increase. Napa County’s fourth-quarter decline in sales was relatively smaller than in any other Bay Area region.

Inventory improved in the
fourth quarter following an extended period of no annual increase in the number
of homes for sale. While inventory growth was widespread across price ranges,
the supply of homes priced between $2 million and $3 million continued to trend
lower. The number of homes for sale priced higher than $3 million showed a
relatively higher increase than in the rest of the Bay Area.

However, buyer reluctance
characterized the quarter, and shoppers were less willing to engage in bidding
wars. Fewer homes sold for more than asking price compared with the same period
last year, particularly homes priced below $2 million. As a result, sellers
were also more likely to sell their homes below original price.

Looking Forward: Typical seasonal conditions, along with more market uncertainty, may
hamper home sales in the first quarter. However, demand should remain steady,
as Napa County’s relative affordability makes it attractive to Bay Area buyers,
and the recent drop in mortgage rates may also help boost interest.

Click here to read the full Q4 2018 Napa County real estate report.


San Francisco

While San Francisco maintained housing-market momentum throughout 2018, with a total 9 percent increase in sales of single-family homes and condominiums compared with 2017, fourth-quarter activity slowed year over year. Slowing sales were widespread across price ranges except homes priced above $3 million, which continued to trend higher than last year.

At the same time, inventory
improvements seen across the Bay Area were also evident in San Francisco, with
more single-family homes and condominiums for sale compared with the fourth
quarter of 2017.

Buyers remained more
enthusiastic than elsewhere in the Bay Area, with both single-family homes and
condominiums commanding premiums. In San Francisco, over half of homes sold for
more than asking price, with single-family homes selling for average 12 percent
premiums and condominiums selling for 5 percent premiums.

Even so, more sellers
reduced their initial asking prices, leading to an increase in the number of
homes that sold at a discount, from about 12 percent last year to 20 percent in
the fourth quarter. Still, San Francisco saw fewer price reductions than elsewhere
in the Bay Area.

Looking Forward: San Francisco homebuyers remain determined, brushing off
financial-market volatility and other uncertainties. With recent improvements
in mortgage rates and stock performance, buyers should continue to forge ahead
in early 2019.

Click here to read the full Q4 2018 San Francisco single-family homes real estate report.

Click here to read the full Q4 2018 San Francisco condominiums real estate report.


Silicon Valley

Similar to other Bay Area regions, Silicon Valley‘s fourth-quarter housing market ended the year with fewer homes sold compared with the same period last year. Declines in sales activity were consistent across all price ranges. At the same time, while there were pockets of continued inventory decreases, Santa Clara and San Mateo counties saw relatively larger increases in the number of homes for sale than did other Bay Area regions, although most of the increases were in southern Santa Clara County and for lower-priced homes.

Still, the enthusiasm with
which Silicon Valley buyers entered 2018 — and which drove bidding wars and
median price growth at double-digit-percent rates — waned in the fourth
quarter, as buyer fatigue set in. Buyers were notably less likely to engage in
bidding wars, and the share of homes that sold for premiums decreased by half. Also,
sellers were more likely to reduce their asking prices, particularly in areas
with more-affordable homes. The rebalancing between buyers and sellers
resulted in the normalization of median home price growth, which returned to
historical averages and suggests a better equilibrium between buyers and
sellers moving forward.

Looking Forward: The improved balance between buyers and sellers, along with moderating
price growth, should help attract potential buyers despite concerns over
financial and political uncertainties. Also, the improvement in mortgage rates
and continued solid job growth should be solid drivers of demand in the
following quarter.

Click here to read the full Q4 2018 Silicon Valley real estate report.


Sonoma County

The year 2018 in Sonoma County reflected a spirit of rebuilding, while fourth-quarter housing market activity was affected by similar buyer concerns as in other Bay Area regions. Sales activity declined in the fourth quarter compared with the last quarter of 2017, with the most notable drop for homes priced above $3 million and those priced between $1 million and $2 million. Sales of homes priced between $2 million and $3 million trended above last year.

In addition, inventory
continued to climb in the fourth quarter, with the largest gain for homes
priced below $1 million. However, despite more affordable inventory to choose
from, buyers remained on the sidelines, weary from the rapid price growth seen
at the beginning of the year. The bidding wars seen immediately following the
October 2017 wildfires waned, and sellers were more likely to unload their
homes at reduced prices, especially for more affordable homes, which saw a
large increase in the share that sold at a discount, jumping from 15 percent in
last year’s fourth quarter to 45 percent this year.

As a result of the
rebalancing between buyers and sellers, the median sales prices declined
slightly from the last quarter of last year, although the overall median price
for 2018 was still 7 percent above 2017.

Looking Forward: Rebuilding efforts will continue to drive Sonoma County’s housing
market, although more inventory and less market competition will help potential
buyers who have been waiting in the wings.

Click here to read the full Q4 2018 Sonoma County real estate report.


Sonoma Valley

Fourth-quarter housing market activity in Sonoma Valley ended the year on a slower note compared with the same period last year — much like the rest of the Bay Area, with fewer home sales across all price ranges. Slower sales activity reflected a similar sentiment seen across the region, mostly concerns over financial uncertainty and higher mortgage rates.

However, unlike the rest of
Sonoma County or other Bay Area regions, Sonoma Valley did not post an
inventory gain in the fourth quarter, continuing the extended trend of
year-over-year declines.

Buyer fatigue settled in
after the strong growth in prices seen earlier in the year, and shoppers were
less likely to engage in competitive bidding. As a result, sellers were more
inclined to reduce their initial asking prices, leading to lower median home
prices in the fourth quarter compared with the same period last year. Overall
2018 median prices, though, were still above 2017 levels.

Looking Forward: Sonoma Valley remains a favorable market for both primary homebuyers
and second-home buyers due to its proximity to San Francisco and other Bay Area
job centers. Higher mortgage rates may impact the median price, although it’s
important to note than many Sonoma Valley luxury home sales are all-cash
transactions, which bodes well for that segment. A lack of inventory and shaky
consumer sentiment remain challenges to the overall market. 

Click here to read the full Q4 2018 Sonoma Valley real estate report.


Lake Tahoe/Truckee

Much like in the Bay Area, fourth-quarter home sales activity in the Lake Tahoe region slowed compared with the same period last year. The decline in sales activity was twice as large for homes priced below $1 million than those priced higher than $1 million, possibly as buyers of lower-priced homes are more sensitive to the increases in mortgage rates that characterized the second half of 2018.

Nevertheless, Lake Tahoe’s
housing market also continued to see declining inventory, unlike trends
observed in the Bay Area. Diminishing inventory pushed the median sales price
for single-family homes up by 12 percent from the fourth quarter of 2017 while
condominium prices cooled slightly.

Buyers did, however, show some restraint as concerns over external factors — such as financial and economic uncertainty and political issues — strengthened in the fourth quarter.

Looking Forward: Activity in 2019 will
reflect much of the consumer sentiment seen elsewhere in the region, and buyers
may take longer to come to the table. However, the recent weeks’ declines in
mortgage rates may help soothe any homebuyer hesitance.

Click here to read the full Q4 2018 Lake Tahoe/Truckee single-family homes real estate report.

Click here to read the full Q4 2018 Lake Tahoe/Truckee condominiums real estate report.

Editor’s note: This report reflects the Northern California areas in which the company formerly known as Pacific Union operates.

(Promotional photo courtesy of Jacob Elliott)

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Shared with permission from the Pacific Union Blog