Rising Home Prices Send Large-Scale Investors Packing in Bay Area
Posted by Jessica Boyd — July 31, 2013
PLEASANTON, CA - Traditional homebuyers and sellers returned to the San Francisco Bay Area real estate market in increasing numbers in the second quarter of 2013, fueling sharply higher home prices and nudging big-money institutional investors with cash to the sidelines, according to an analysis of MLS data by the research division of Better Homes and Gardens Mason-McDuffie Real Estate.
To be sure, many luxury homebuyers – and even some first-timers – continued to pay with cash only to obtain financing once a purchase was complete. But with the region’s large supply of bargain-basement distressed properties depleted, all-cash investors increasingly gave way to traditional homebuyers with a 20 percent down payment.
Median sales prices were sharply higher in all nine Bay Area counties on both a quarter-over-quarter and year-over-year basis. Areas with the largest year-over-year increase in median sales price were Alameda County (+36%), Solano County (+34%), and Contra Costa and Napa counties (+32%). San Francisco recorded the region’s highest median sales price, which reached $1,201,920, followed by San Mateo County ($1,199,925) and Marin County ($1,069,559). At $271,544, Solano County’s median sales price was the lowest in the region.
For the Bay Area as a whole, the median price of an existing, single-family detached home rose to $740,567 in the second quarter, up 11 percent from 667,021 in the first quarter of this year and 30 percent from last year’s second-quarter median sales price of $570,081.
After declining to the lowest level in five years in the first quarter, sales of existing detached homes rebounded in the second quarter, climbing 44 percent from 9,985 homes sold in the first quarter to 14,370 – an increase of 4,385. Despite the improvement, the number of homes sold in the second quarter of 2013 declined by 11 percent, or 1,838 homes, from the same quarter a year ago, when 16,208 homes changed hands. Santa Clara County set the pace with 3,075 homes sold, followed by Contra Costa County, with 2,841 homes sold, and Alameda County with 2,785 homes sold.
With fewer distressed properties on the market and more homeowners with enough equity to test the market as home prices increased, the inventory of new listings on the market improved slightly. As of June 30, 2013, 6,105 existing, single-family detached homes were listed for sale in the entire nine-county Bay Area – an improvement from 4,098 homes on the market on the final day of the first quarter but still 35 percent below the 9,343 homes listed for sale on June 30, 2012.
Once listed, homes continued to sell at a near-record pace in some markets. For the Bay Area as a whole, homes were on the market an average of only 38 days before receiving a final purchase offer, down from 54 days in the first quarter of 2013 and 58 days in the second quarter of last year. Homes in Alameda County sold in an average of 21 days, while Sonoma County recorded the highest average with 75 days on the market.
Looking ahead, there are some indications that the Bay Area existing-home market may be normalizing. That’s good news for both buyers and sellers, since few observers believe the market can sustain either the current volume of home sales or the double-digit year-over-year increases in the median sales price that have become common – even in an environment where demand continues to exceed the supply of available homes.
With investors holding on to recent purchases as rentals, entry-level homes may continue to be in short supply. Though there may be fewer multiple-offer scenarios, when it is possible for them to do so, some homebuyers will pay cash to get into a property and then obtain a mortgage loan once they are in the home. So long as interest rates remain near record lows, buying a home will remain an excellent lifestyle decision for Bay Area residents.
Current homeowners with the desire to purchase a larger or newer home who have been waiting for home prices to recover will continue to pay close attention to what is selling – and for how much – in their neighborhood. If median sales prices continue to rise in the next couple of quarters, more and more homeowners will discover they have regained enough equity to sell. Pricing will be critically important. For both homebuyers and home sellers, working with an experienced REALTOR® with local-market expertise is a must.
* Days on market is the number of days a property was listed on the market until it went under
contract at its final listing price. This may not reflect previous listings.
**The median home price for the entire Bay Area is the mean of median home prices of each of the nine Bay Area counties. Each county’s median home price is the mean of median home prices of each of the cities within that county.
Data are sourced from multiple listing services and are deemed reliable but not guaranteed.
All percentages rounded to nearest whole number. Bay Area refers to sales within Alameda County, Contra Costa County, Marin County, Napa County, San Francisco County, San Mateo County, Santa Clara County, Solano County and Sonoma County.
About Better Homes and Gardens Mason-McDuffie Real Estate
Our heritage began with the founding of Mason-McDuffie Real Estate in 1887. In 2010, the company was named the 26th largest real estate services firm in the nation (REALTrends 500), and Number One in the San Francisco East Bay (SF Business Times). The company provides comprehensive solutions to home buyers and sellers, and handled 6,500 transactions in 2012, generating $2.8 billion in sales volume. Better Homes and Gardens Mason-McDuffie Real Estateincludes joint ventures with partners Highland Partners in Piedmont and Montclair, Wine Country Group Realtors in the North Bay, and Tri-Valley Realty in Pleasanton-Hopyard and Ruby Hill, and Bahay Co. in Concord. Better Homes and Gardens Mason-McDuffie Real Estate is locally owned and has more than 1,100 real estate professionals with 30 offices in eight counties in the Bay Area and the Tahoe/Truckee region. For more information, go to www.bhghome.com.