The Bay Area Real Estate Report - February 2018
Inner Bay Area inventory ticked up 9.6% in January vs December, but a modest January uptick is normal and the real story is that inventory was down a whopping 24.3% Year-over-Year. Putting it in perspective regarding just how low our inventory is, it’s currently nearly HALF what it was at this same time 4 years ago and approximately 1/5th what is was at the same time 8 years ago!
Meanwhile, as we begin the busiest time of year for the Bay Area real estate market, the 2017 year-end numbers are in and among other things, Bay Area home prices continue an historic streak of double-digit gains. The ever-tightening housing supply pushed Bay Area home prices higher yet again in December, extending year-over-year double-digit gains for the 5th straight month — and overall gains to an historic 69 straight months.
The latest run-up is similar to, and has now exceeded, the streak of rising Bay Area home prices between December 2001 and November 2007. We also had a similar year-to-year growth in housing prices through the late 90s during the run-up to the dot com bust.
The median sales price for a single-family home in the greater 9-county Bay Area rose to $885,000 in December, up 14% from the previous year, well outpacing expert forecasts for 2017. The latest data continues a Bay Area housing narrative now stretching over 7 years — a rollicking market that continues to be great for property owners, but unforgiving for newcomers to the market, including middle-income Bay Area families hoping to buy.
4 of the 9 greater Bay Area counties ended the year with median home sale prices topping $1 million. Single-family home sale prices in Santa Clara County raced up 35% year-over-year, reaching $1.3 million in December. San Mateo County closed the year with a 12.6% gain in sales prices to $1.5 million. San Francisco County was up 12% to to 1.475M. Alameda County was up 14.2% to $862,000, Contra Costa up 9.1% to $600,000.
According to the Silicon Valley Leadership Group, the booming Bay Area economy created about 367,000 jobs between 2010 and 2015, while building just 57,000 new homes. The impact on the housing market has been staggering — just the construction of the new Apple spaceship headquarters by itself has helped drive home prices up double digits in nearby Cupertino and Sunnyvale. Other major tech companies continue to expand, bringing well-paid engineers and professionals to the region.
But the escalating prices also mean fewer home sales, with many Bay Area residents unable or unwilling to jump into one of the most expensive markets in the country. The limited supply of single-family homes drove down December sales year over year, although only by 1.2%. The inventory of entry-level homes has been especially low and many buyers are focused on that segment. Seasonal slowdowns and more sales of lower-cost, starter homes drove December’s median price down from a record $910,000 in November.
Historically low mortgage rates have combined with historically low inventory to fuel the long-standing surge in Bay Area home prices. But mortgage rates have been steadily on the rise recently and Friday they rose to the highest in more than a year. The benchmark 30-year fixed-rate mortgage averaged 4.32% during this past week. That was up 10 basis points from the prior week, up more than 30 basis points from the beginning of the year, and up 50 basis pts (.5%) from where they were in September. To give you an idea of what a .5% difference makes, for a 750,000 loan, the difference in monthly mortgage payments would be $220. Higher mortgage rates take a bite out of home price affordability which is already at historic lows for the Bay Area.
Overall, going into the busiest home buying season, nothing seems to be able to slow down the continued steady rise in Bay Area home prices. Mortgage rates are trending higher, but demand continues to greatly exceed supply and so the longest running Seller’s market in modern Bay Area history continues.
Mortgage Rate News - February 2018
Spurred by a sell-off in the stock market and further evidence of a strong economy that should soon force interest rates higher, mortgage rates moved higher last week. The benchmark 30-year fixed-rate mortgage averaged 4.32% this past week, which was up 10 basis points from the prior week and up 30 basis points from the start of the year.
The rate for a typical 30-Yr Fixed Conforming Loan (w/0 Pts) (assuming at least 20% down payment/equity) is now at about 4.125%, while a typical 30-Yr fixed High Balance Conforming Loan (w/0 Pts) is at about 4.25%, and a typical 30-Yr Jumbo Loan (w/0 Pts) is at about 4.375%
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