March 29th: Real Estate Trends In The SF Bay Area

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Executive Summary

Buyer FOMO (fear of missing out) has been affecting sales prices over the last 6 weeks, with List-to-Ask ratios going through the proverbial roof. Our buyers have been competing against anywhere from 5-18 offers, resulting in prices going as high as 25% over asking on some homes. Offer dates are being set more often but some are taking preemptives if you ask the right questions. Inventory levels continued to rise (active, pending, and sold) yet not fast enough to alleviate demand. Why?

Silicon Valley tech companies had a great year end, so bonuses have been plentiful. As such, we now have many more cash rich buyers. This extra liquidity is enabling them to go ABOVE appraised prices. Another reason buyers are experiencing FOMO is the anticipated rate cuts coming; they want to get in now before rates go lower and competition increases. We advise our clients with RSUs to consider doing a recast on their mortgage at the next vesting cycle that has the most attractive interest rates. DM me for more information on this strategy.

Inflation reports have been mixed lately so FED has delayed their rate decreases, but elections are coming and there are political pressures at work. This next month we anticipate mortgage rates to lower slightly.

KEY TAKE AWAYS....

• SALES VOLUME INCREASING - We are no longer in the 15 year lows, but there is just not enough inventory at the first time single family home entry price.

• 30 year mortgage rates went from 7.15% to 6.91%.

• What sold the most over asking? Four out of every ten single family homes sold over asking price. 16% of single family homes sold over 110%. The most competitive prices last month were in Alameda where 8% of homes listed between $800K to $1.8M sold over 110%

• What is taking the longest to sell? San Mateo condos under $800K and Mid-Peninsula condos are taking between 43-62 days.

• What is happening to sales prices? All categories and areas are trending up. Over the last 10 years, appreciation of SF Bay Area single family homes averages 12% appreciation while condos averaged 6%.

• Is now a good time to sell or buy?

  • For well marketed and well priced homes, expect multiple offers.

  • Buyers are flush with cash and are searching for homes in earnest.

  • Investors are gobbling up fixer uppers at aggressive sales prices. This will mean the After Repair Values (ARV) will need to be strong in the near term if planning to sell.

  • Check out one of my latest blogs for more prediction on 2024 and 6 key questions to ask.

Off Market Properties:

• San Mateo (Aragon) (2630 sqft) - 3 bedrooms, 2.5 bath, 1-car garage

• San Mateo (4 PLEX) - Two 1 bedrooms, two studios

• Santa Cruz (1622 sqft) - 4 bedrooms, 5 bath, 1-car garage on oversized lot

• Belmont / Redwood Shores (1770 sqft) 3 bedroom, 2 bath townhouse

• ....

• Want the full list? Feel free to reach out directly to me (650.451.8763).

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Table of Contents:

• How Are The SF Bay Area Markets?

• What's Selling The Most RIGHT Now?

• Mortgage Rates & The Stock Market

• How We Help Our Buyers & Sellers

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How Are The San Francisco Bay Area Real Estate Markets?

Overall, the latest SF Bay Area real estate trends show the sales prices increasing. Inventory levels are still low due to seller's "Golden Handcuffs", aka cheaper mortgages they purchased with or refinanced. This is causing a limited amount of inventory, especially at the lower price points where many investors are also competing with first time home buyers.

SF Bay Area Real Estate Trends - Month over Month (MoM)

The charts below are month-by-month heat maps of pricing in the SF Bay Area. They are grouped by county and property type (Condo, Single Family Home, Townhouse). The metrics are Price Per Square Foot, Days On Market, how many sold, and the List To Sales Price Ratio. Green highlighted cells indicate items keeping prices up in comparison to previous month's metrics. Red highlighted cells indicate the opposite, i.e downward pressure on sales price towards a Buyer's Market.

(Click on each county's data to make larger). Make county / location bigger than MoM.

SF Bay Area Real Estate Trends - Year over Year (YoY)

Here's the data to support the year over year price growth (supply versus demand) we are currently experiencing.

Inventory - 20 Years vs. 10 Years

• Every year we see active and sold inventory go up then down, a predictable cadence. How high or low is dependent on the next metric, Months of Inventory or the rate of change in inventory being sold.

• We are still hovering on the verge of historically low inventory, yet Condos starting to outpace supply.

• The graphs below show 20 year and 10 year time horizons from today.

Months of Inventory - 20 Years vs. 10 Years

This metric tells us how long it would take to sell all the homes on the market if no new listings were added. Five to six months is considered a balanced market, anything less is a seller's market.

• As active inventory goes up and the rate of sales goes down, this key performance indicator (KPI) will continue to tick upward. This metric is telling us that there are less buyers for condos right now.

% Over Asking vs. DOM -

Related to Months of Inventory and the rate of change are these next two KPIs - how much over asking a home sold for and how fast it was sold, i.e. Days On Market.

The strength of the tech industry is impacting the demand, as we anticipated earlier this year.

Sales Price - 20 Years vs. 10 Years

In general, single family home prices have doubled every 10 years in the SF Bay Area since the 1980s. Condos in general have tripled in value since 2012. Due to the local economy of the SF Bay Area, we anticipate these values to remain high, especially as inventory levels are still near historic lows.

Please reach out to schedule your free consultation to discuss your home price or home search.

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What's Selling The Most RIGHT Now?

Here are the pending details.

SF Bay Area Real Estate Trends - Pending volume by Price Range and county

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FED, Mortgage Rates & The Stock Market

• THE CME Group predicts the FED to LOWER interest rates starting in June based on latest inflation reports.

• Mortgage rates went up a hill this month starting in the high 6s, peaking in the 7.1% and now back to 6.9%. Rates are expected to be stable or come down slightly this month.

• S&P500 and tech stocks are up, enabling tech buyers to withstand interest rate fluctuations.

• Layoffs spiked briefly in January but has since tapered down. Note that much of tech had been overstaffed so companies have been "right sizing". Almost 19 of 20 different sectors reported new jobs. Unemployment ticked up from 4.0% to 4.5% in January data which aligns with our January and February sales.

• When will the next Recession occur? Check out my infographics in this blog post for a brief primer. Then we can discuss the rest over our next coffee.

• At KPeterson.realty, we know not every lender is created equal and we work with lenders who's rates today are around 6.25% for 10/1 ARMS. Our lenders also may value your RSUs better than others. Reach out and tap into our network.

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How We Help Our Buyers

• We work with the best lenders who are able to beat the current interest rates (some as low as 6% on a 10/1 ARM).

• Search For Homes by customizing your financial situation before contacting a lender to determine what you can afford.

• Investing or not sure which areas to look in? Explore Markets to generate reports that analyze a city by days on market, average home price, price per square foot, average number of bedrooms / bathrooms / square feet in YOUR price point.

How We Help Our Sellers

• We have a $0 down / 0% renovation program in which you don't need to pay back for one year, giving you flexibility on when to sell. The goal is for every $1 spent on renovations to net (on average) a $2 to $4 return on investment. Every family has a unique real estate scenario based on their needs and circumstances. Feel free to schedule a consultation with me today.

• Click "What's My Home Worth" to find out the rough value of your home and automatically monitor it monthly. It also shows you various options for your equity (refi, home equity line or loan, etc).

• If you'd like a more specific valuation of your home, give me a call.

What's My Home Worth?

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