Bay Area Housing Market Heating up Along with Summer Temps
Maybe we just had a late spring. That’s one possible explanation for what we’re seeing in the Bay Area housing market. Normally, the real estate market picks up in March, April and May and then takes a breather over the summer for vacations, graduations, weddings and other activities. But this year it seems like that’s being reversed.
After a modest spring, the local housing market has been heating up this summer with strong sales in June and even into July in many areas. Sales activity has been especially robust in the higher end of our markets – over $1 million in much of the Bay Area and $2 million and up in San Francisco. But even the mid-level market was surprisingly active (more on that below).
As I was combing through last month’s sales figures, I noticed an interesting trend: In most of our Bay Area markets in June we had the highest level of million-dollar home sales since the summer of 2008. You might recall that was just weeks before the collapse of Lehman Brothers sent the financial markets into a tailspin and pushed our economy into the “Great Recession.” Now, three full years later, we’re seeing a much brighter picture for the local housing market.
Coldwell Banker Residential Brokerage will be issuing our luxury market reports next week, but I thought you’d be interested in getting a sneak preview today. Here are a few highlights from various markets:
- East Bay – Sales of million-dollar homes jumped 26 percent in June from the previous month to 159 transactions, the most since last summer. Even more impressive, multi-million-dollar sales quadrupled from a year ago to 16 last month. The median price was also up nearly 13 percent;
- Silicon Valley – There were a whopping 284 million-dollar home sales in June, up from 230 the previous month and the highest level the region has seen since June of 2008. The very high end of the market – those homes over $2 million – saw sales spike to 52 from 36 a year ago;
- Marin County – Million-dollar sales totaled 80 in June, up from 60 in May and the most that county has seen since July of 2008;
- San Francisco – $2 million sales spiked from 50 in the first quarter of the year to 86 in the second quarter, the most since 2008. And sales of $3 million-plus homes more than doubled to 33 in the second quarter (April-June) vs. 16 in the first.
The high-end of the market is not the only segment doing well. The entry level and mid-level markets have shown solid signs of improvement as summer rolls along. Bay Area home sales overall rose sharply last month to the highest level for any month since June 2010, when expiring tax credits gave housing a final boost, according to DataQuick, the La Jolla-based research firm.
The only thing holding back the lower end of the Bay Area market in many cases has been a lack of inventory. “Inventory remains elusive,” Sebastopol manager, Stephen Liebling, said in speaking for many of the managers around the Bay. Because of the shortage of good, well-priced homes, multiple offers are picking up in many communities. In nearly every one of our regional markets, you can almost be assured of multiple offers for a well-priced, well-located, and nicely staged home in the entry price level for that market.
Clearly, the Bay Area’s relatively strong economy – especially the robust tech sector – is playing a key role in our housing market. As Inman News put it in a Friday article, “Tech is back — and tiptoeing along behind it, at least by some measures, is the San Francisco-area real estate market.”
The Inman story recounted what a lot of the local media have discovered in recent weeks: That the tech sector is giving new life to housing in many parts of the Bay Area. “Tech jobs are on the rise, and with the increase in high-paying jobs, we are seeing more and more younger, first-time homebuyers,” one San Francisco agent noted.
“Indeed, technology-based industry — which drove Bay Area home prices to fabled levels during the headiest days of the housing boom — seems to have found its legs,” Inman reported. At the end of 2010, San Francisco had an estimated 30,700 tech jobs, compared with the 32,800 at the peak of its tech boom in 2001, according to an analysis by real estate firm Jones Lang LaSalle.
This all is not to suggest the housing market is completely out of the woods. Real estate is very much a local business. And while many of our markets are on the mend, others are still softer than they were a few years ago. And there still is an overhang of distressed properties that will continue to come on the market as bank owned REO sales in the months ahead.
While we take quite serious the nation’s fragile economy, and most recently the stalled talks to come to terms with our national debt limit, we can be thankful for the Bay Area real estate activity that continues to move forward. We are fortunate to live and work where we do. The limited housing stock, diverse job base, incredible universities, and great weather are all factors that help homebuyers focus on these terrific home values and low mortgage rates.
