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Housing Supply Remains Tight Northern California

Market Watch | Housing Supply Remains Tight in Northern California

Limited inventory and high demand was the continuing trend as the summer season ended. The California Association of Realtors reported that San Francisco overtook San Mateo as the most expensive market in the state. Supply remained tight as every single county in the San Francisco Bay Area saw a reduction in unsold inventory, as did most parts of the Central Coast and Central Valley. San Francisco saw the highest price per square foot in August at $871/sq. ft., followed by San Mateo ($863/sq. ft.), and Santa Clara ($668/sq. ft.).

Stats from Office around the Bay

East Bay – Fremont saw reduced inventory, down 38% from 2016. Even with minimal inventory, buyers were still price-sensitive, prompting sellers to keep asking prices reasonable. The luxury market also required fair asking prices for a quick sell, even with a slight increase in inventory. Oakland also experienced a continued sellers’ market with no increase in inventory and far more buyers than sellers. Most properties received about three to five offers, creating a great opportunity for sellers to get a higher price for their homes.

Monterey County – In Monterey, the market saw the expected slowdown with children returning to school.  However, new listings in the $3-5 million range appeared on the market. Pacific Grove saw an increase in activity with some buyers looking for vacation properties.

North Bay – Santa Rosa Bicentennial saw a busy month with 26% more closed sales than in July.  This increase in properties coming off the market resulted in fewer available homes for eager buyers. The luxury market remained active with more properties being listed than in previous months. Southern Marin’s market slowed around Labor Day, but has since picked up. Supply currently exceeds demand and inventory is up to 1.6 MSI (months supply of inventory) from 1.1 recently. This means that homes are staying on the market longer giving buyers more choices with less competition. The luxury market has seen steady growth with three Mill Valley properties closing above $5 million. Many buyers in the multimillion-dollar price range have high expectations, including new construction with pools, pavilions and views in desirable locations.

Placer County – Tahoe offices sold 90 properties in the last two weeks of August, 17% more than the previous two-week period and the largest sales period to-date in 2017. Eighteen of those properties were sold at above $1 million. Buyers remain interested and continue to search for their dream home. Luxury sales dipped with 163 homes sold in 2017 compared to 198 sold in 2016.

Sacramento County – Sacramento Fair Oaks experienced an unseasonal uptick in pending sales, up 11% from 2016 and 16% from July. Inventory remains 10% less than last year. This combined with low interest rates indicates a strong selling period. Buyers abound with new open escrows in August at the highest level since May 2012. Sierra Oaks saw more inventory resulting in increased competition for sellers. While many properties still received multiple offers, the rising inventory levels have given buyers more options and leverage with negotiating. The luxury market also saw strong increases in inventory.

San Francisco – In San Francisco, the overall trend remained the same – high demand with low supply.  Sellers with fixer properties had to be strategic with their list price.

SF Peninsula – In Half Moon Bay, the market saw a slight increase in inventory. Buyers remained price sensitive even in the luxury market. Menlo Park had high buyer demand in all price ranges, but particularly the starter and luxury markets. While this demand was eased by some increases in inventory, there was also an increase of buyers coming into the market. A few properties listed at $10-plus million closed after sitting on the market for over 100 days. Palo Alto’s market had an increase in the percentage of local buyers. This combined with low inventory created a sustained sellers’ market. Redwood City saw slight increases in inventory, such as 15 new single-family homes in San Carlos. Because of this new inventory, sellers had to list their homes at reasonable prices to receive multiple over-asking offers. Over the past month, San Mateo’s office saw increased inventory. This rise in activity was also prevalent in the luxury market.

Silicon Valley – Cupertino saw a highly charged sellers’ market. With the market favoring sellers, many properties were going for amounts much above their asking prices. Los Gatos saw similar market trends, prompting multiple and even preemptive offers. Gilroy and Morgan Hill also had a continued seller’s market. Well-maintained homes with reasonable prices received multiple offers from buyers willing to waive appraisal contingencies. Due to current demand, sellers could secure approximately $700 per square foot. The market in Los Altos saw the same conditions of low inventory and multiple offers.  The current market has created knowledgeable buyers and sellers, who have learned to act quickly. On average, homes have only been on the market for 12 days. The luxury market remained steady, but flat. Inventory increased and days on the market averaged 27. The San Jose Willow Glen market also experienced low inventory. There were many active properties in the luxury market with a $1.2 million starting point.  Even at that price, buyers were faced with competitive bidding wars on most homes. Saratoga continued the trend of low inventory with a decrease of 5.9% from last month.  Days on the market also decreased to 22. This is a 42.1% decrease from last month and a 31.3% decrease from 2016. The luxury market remains steady with 20 properties listed between $4-$12.5 million.

El Dorado County – El Dorado Hills saw low sales in year-over-year statistics with tight inventory and new construction not being able to keep up with demand. The high demand led to multiple offers, especially with homes under $600,000. Home prices have slightly increased, although appraisals can be below the purchase price. Sellers must be sure to price their property competitively, even with the current levels of demand. The luxury market has plenty of available inventory.

Market Watch is a monthly column exploring the Northern California housing market. Click here to view past issues.


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