We keep hearing about rising interest rates and widespread concerns about the cost of housing — and how these and other factors are bound to put the brakes on the Bay Area real estate market.
Yet somehow it’s not that simple.
In February, according to a new national report from Redfin, the fiercest bidding on homes took place in the Bay Area. In San Jose, 63 percent of homes sold above list price in February, followed by 62.0 percent in San Francisco and 59.1 percent in Oakland. Among all U.S. markets, those were the three highest shares of “over asking” bidding. Following somewhat close behind were two markets in the state of Washington: Seattle with 49.3 percent and Tacoma with 36.3 percent.
February’s “fastest” markets were, in order, Seattle (with nearly half of all homes pending sale within 12 days of being listed); Oakland (where homes typically spent 15 days on market); Denver (18 days on market); San Jose (21 days); and San Francisco (28 days).
Still, about those brakes: The housing supply is low all over the country, and that doesn’t make for a healthy market in the long-term.
Nationally, the number of homes for sale declined 12.9 percent in February on a year-over-year basis. It was the third consecutive month of double-digit drops in inventory, Redfin said. The number of homes for sale fell year-over-year by 12.0 percent in Oakland, by 5.3 percent in San Francisco and by 2.0 percent in San Jose. (Sacramento inventory practically fell off a cliff — down 25.4 percent from a year earlier.)
With “low-tier” affordable homes in particularly short supply around the nation, first-time homebuyers are struggling to get a foot in the door. That’s because, with inventory at such low levels, competition persists: Those buyers who remain in the game keep putting upward pressure on prices.
Taking all of this under consideration, Nela Richardson, Redfin’s chief economist, painted a half-rosy picture of the current market.
“The total level of home equity reached a new peak at the close of 2016, according to recent Fed data,” Richardson said. “While great for homeowners, continuously strong price growth across the U.S. since 2012 has posed significant challenges for first-time buyers, especially given such low supply in affordable price-tiers. There is a silver lining on the horizon, however. Rising prices and increased equity may tip the scales for homeowners who have been delaying their decision to move up, which could add much-needed starter-home inventory to the market.”
We shall see.
Read the Redfin report here.
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Photo: Home for sale in Lafayette, California. (Courtesy of Redfin)
