April ’13 Numbers

What a difference a month can make, so it seems at first glance. We finally saw a fairly substantial gain in inventory, 1,830 homes for sale, up from 1,395 in March. However, we have to be asking ourselves, is that the normal influx we see this time of year? Although it’s a fairly sizable percentage gain, in reality, we still have extremely low inventory levels. We increased our month’s supply from 18 days to 24 days. Some cities benefitted more than others with for example, Berkeley and Oakland are now at or slightly above a 1 months’ supply.

More buyers are coming into the market competing for what little is available. Houses are selling quickly and for more money.

When will we get back to normal levels? No one seems to be willing to predict anytime soon. Many are pointing to a gradual move towards a more normal market perhaps seeing this “hot” market begin to plateau later this year.

Why are we here? I’m borrowing from Leslie Appleton Young’s, (CAR principal economist), list as a basis;

1)      Housing affordability is at historic highs due to home prices still being well below their peaks in many areas coupled with the lowest interest rates that we’ve seen in years.

2)     Low rates impacting other investment alternatives

3)     Little new construction for last 5 years

4)     Supply & Demand, Fear and Greed

5)     Foreclosure pipeline drying up

6)     Investors are renting instead of flipping

7)     Many potential sellers fall under the following groups:

  1. They owe more than the property is worth and are stuck
  2. If they don’t have to sell, prefer to wait until prices get back to their peaks
  3. If I sell now, do I want to buy something else in this competitive market
  • Our inventory for the East Bay (the 38 cities tracked) is now at 1,830 homes actively for sale, up from February at 1,395 and up from the December low of 1,086 homes. We’re used to seeing between 5,000 and 8,000 homes in a “normal” market in this area.
  • The month’s supply for the combined 38 city area is now at 24 days up from the December low of just 15 days. Historically, a 4 to 5 months supply is considered normal for this area.

  • Our Pending/Active Ratio is at 2.45. This is the 14th month in a row that the ratio has been above 2, still signaling a strong seller’s market. (Keep in mind that this number is overstated due to the large number of short sales that remain in pending status for longer periods than normal).

  • Distressed properties, (REOs and Short Sales), are still declining. 13% of the active listings, 43% of our pending sales (primarily due to the large number of short sales – 37%), and 28% of the sales over the last 4 months have been distressed properties.

 

Click here to view Glen’s Numbers for April, 2013.

 

Recent News

Bay Area home-sales price rises, Tight inventory, low interest rates propel March rise, By Carolyn Said. April 19, 2013

Low interest rates, tight inventory and improving buyer confidence helped propel Bay Area home sales in March.

The median sales price across the nine counties rose 21.8 percent compared with a year earlier, while sales volume shrank 6 percent, according to a real estate report released Thursday.

“The pendulum is swinging back to normal,” said Andrew LePage, an analyst with San Diego-based Dataquick, the real estate information company that produced the report. “The high end is not comatose anymore, and there are far fewer foreclosure resales.”

Those two factors – along with a continued lack of inventory – propelled the median price paid across the nine counties to $436,000, compared with $358,000 in March 2012. More than half the increase was due to rising home prices, the rest to a change in the mixture of homes sold.

“It’s crazy,” said Glen Bell of Betters Homes & Gardens/Mason-McDuffie Real Estate in Berkeley. “In the 38 East Bay cities I track, we are sitting on an 18-day supply of homes for sale – typically it would be three or four months.”

Right now, that 38-city area has 1,400 homes listed. Normally, it should have between 4,000 and 7,000 homes for sale, he said.

Housing Market Rebound: Real or Mirage? by Emily Driscoll, April 26, 2013

Although the housing market seems to be on the upswing in many parts of the country, investors aren’t ready to fully jump back into the sector over recovery concerns and worries over another bubble forming.

The S&P/Case-Shiller index, covering approximately half of U.S. homes and measuring prices compared with those in January 2000 creating a three-month moving average, found prices rose in the largest 20 markets by 8.1% in January compared to a year ago, and up from a 6.8% annual gain in December. The index shows that U.S. home prices rose in January at the quickest annual pace since 2006 right before the bubble burst, yet homeowners may be fearful that the existing market conditions are growing at an unsustainable pace.

Despite the improvements, there are still challenges to be addressed, says Shah Tehrany, managing director at Franklin First Financial.

Impact of Low Interest Rates                                     Fewer Foreclosures

Unemployment                                                                Availability of Mortgage Lending

“It would take a double dip recession to really offset the housing recovery at this point and I don’t think that just a lingering slow pace in growth will be enough to knock it off its tracks. “

Consumers may be able to see indications of sustained market growth in as little as the next few months, predicts Gross.

“We’ll see how the summer goes and that will be a little bit of an indicator but my estimate would be another year until we have a good housing market,” he says. “If employment goes down, within the year the housing market should be in a much better position than we are today.”

LPS: California, Washington Lead Monthly Price Gains in February, By: Esther Cho, 04/29/2013

California cities dominated the top 10 list for metro area price gains, with 9 out of ten metros representing the state. Seattle, where prices rose 2.5 percent, was the one exception and ranked No. 4. California cities in the top five were San Jose (+3.2 percent) San Francisco (+2.8 percent), Vallejo (+2.6 percent), and Sacramento (+2.4 percent).

Bay Area housing recovery spreads from Silicon Valley to East Bay, By Pete Carey, Mercury News, 4/26/2013

The Bay Area’s overheated housing market is restoring thousands of homes to their pre-crash peak values in a ZIP-code-by-ZIP-code recovery that is rapidly spreading from Silicon Valley to the East Bay.

Thirty-four of 185 ZIP codes in five counties have regained or surpassed their bubble-era peak home value or are less than 1 percent from it, according to this newspaper’s analysis of February median values for all homes from online real estate site Zillow.

Another 49 ZIPs are within 15 percent of their previous highs, including 18 in the East Bay. A year ago, only part of leafy Palo Alto had regained the value it lost after Bay Area home values crested in 2006-07.

“Seven or eight years ago, there was really a bubble,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. “Now it’s just good real estate where values are returning to near past peaks.”

Every part of the Bay Area has seen gains in the past year, with Silicon Valley leading the way. But parts of Contra Costa and Alameda counties, where subprime lending was heavy, are still far below their peaks.

The recovery has pulled many homeowners out from underwater — when houses are worth less than the mortgage — and convinced others it may finally be time to sell and move to bigger homes. They’re diving into a fast-moving market in which homes can sell in a day for more than the asking price

Fixed Rates Move into Record-Low Territory, DSNews, By: Tory Barringer, 05/02/2013

“Mortgage rates have fallen for seven consecutive weeks, to levels that are at, or near, record lows,” Bankrate said in a release.

Bay Area Home Sales Dip Below 2012 Level Again; Median Sale Price Rises, DSNews, April 18, 2013

Bay Area home sales fell below a year earlier for the second consecutive month in March as demand continued to outstrip supply in many markets. While low-end sales fell sharply compared with March 2012, $500,000-plus transactions jumped, helping to push the median sale price up on a year-over-year basis for the 12th consecutive month, a real estate information service reported.

It appears that well over half of the 21.8 percent year-over-year increase in March’s median sale price reflects rising home prices. It’s Economics 101: Prices go up as growing demand meets an exceptionally low supply of homes for sale. However, a portion of the March median’s year-over-year gain reflects a change in market mix – sales of low-cost distress homes have fallen sharply, while sales of pricier move-up homes have shot up.

“Higher sales in the middle and top of the housing market reflect improved consumer confidence, ultra-low mortgage rates and the unleashing of more pent-up demand than many anticipated. There’s been a shift in psychology, where more people worry prices will rise and fewer fear a decline. It’s drawn a lot of folks off the fence following a long stretch of sub-par sales, especially in the higher price ranges. In the more affordable markets, we’ve seen a big drop in foreclosures, which limits the supply of homes for sale. Then you have homeowners who still can’t sell because they owe more than their homes are worth,” said John Walsh, DataQuick president.

“The more prices rise, though, the more likely we’ll see a lot more people put their homes on the market,” Walsh added. “There’s pent-up demand among potential sellers, too, and many will try to move as soon as it makes sense. A substantial jump in inventory would at least moderate home price growth.”

 

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