I am pleased to share with you our latest Market Report for the San Francisco Bay Area. The report begins with economic and real estate commentary presented in partnership with the Rosen Consulting Group (RCG). For the statistical report of the regional housing market, we look at the ten counties associated with the SF Bay Area, focusing primarily on detached single-family homes, with added coverage of the significant condominium market in San Francisco. Enjoy the information and insight provided in the report and I look forward to discussing the market with you.
STRONG JOB MARKET KEEPS HOUSING MARKET MOVING
The housing market continued to heat up in May as more buyers and sellers entered the market. Stronger hiring in the outer SF Bay Area offset some losses in the inner SF Bay Area, and the regional economy added more than 12,000 jobs year-to-date. Positive year-over-year job growth helped keep the labor market strong, as the unemployment rate remained in the low-4% range. Stock market gains also continued to boost regional demand. Even as the inventory of available homes increased in May, upward pricing pressures remain.
INVENTORY OF AVAILABLE HOMES JUMPS HIGHER
With the spring buying season in full swing, more homes came onto the market across the SF Bay Area. Active listings increased to 6,400 homes, up more than 10% since last month. Highlighting a growing optimism among sellers, this was the highest inventory level in more than four years. Despite the increase in inventory, active listings remain slightly lower than the historical average. The number of listings increased in all SF Bay Area counties, though inventory expanded the most in Alameda, Marin and San Francisco counties.
SALES INCREASE WITH HIGHER INVENTORY
Purchase activity increased alongside the growing number of homes available for sale, underscoring that available inventory remains one of the primary constraints on sales. There were more than 4,000 sales in May, a 9% increase over April. In some ways similar to listing volume, while sales activity was closer to a typical May it was still a bit lower than the historical average. As options to purchase increased, more buyers entered the market, though some remain on the sidelines hoping for mortgage rates to fall. Overall, sales activity increased in most SF Bay Area counties, with the largest increases in Alameda, Marin, Santa Clara, and San Mateo counties. Meanwhile, sales volume slowed slightly in Napa and Santa Cruz counties, two counties where vacation and second homes make up a larger share of sales.
HIGHEST PRICE TIER SHOWS SIGNIFICANT STRENGTH
Sales in the upper price tiers were still a major driver of overall SF Bay Area sales activity. Nearly 800 homes sold for more than $2.5 million, a 20% increase over April. Highlighting growing demand in this price range, the segment accounted for a larger share of sales than at any point in the last seven years. Most of the sales in this price tier were in prime neighborhoods in San Mateo and Santa Clara counties, but Alameda and Contra Costa accounted for an increasing number as well.
HIGH DEMAND LEADS TO INCREASED COMPETITION
Even with more homes on the market, strong demand resulted in accelerating buyer competition. Roughly two-thirds of homes sold for more than the asking price in May, the largest share in two years. Alameda and San Francisco counties continued to lead the SF Bay Area with nearly 80% of homes sold for more than the asking price. Of homes sold above the list price in the Alameda and San Francisco counties, sellers received a premium of more than 14% on average. Not only did more homes sell for a higher price in the SF Bay Area, but they also sold faster. SF Bay Area homes sold in May were on the market for an average of roughly three weeks. The number of days on market improved across all price ranges compared with last year. Homes in Santa Clara and San Mateo counties moved at the fastest pace, spending an average of roughly two weeks on the market. Homes in the North Bay were on the market for longer than the rest of the region, averaging more than two months in Napa and 1.5 months in Sonoma. However, in both cases time on market was down from the beginning of the year.
LOOKING AHEAD
The SF Bay Area housing market continued to expand even as pricing reached record levels in many neighborhoods. Prospective buyers seem to have fully adjusted to the current mortgage rate environment, realizing that there is an opportunity to purchase now and be able to refinance if interest rates fall in the future. Underlying the strengthening housing market is the relatively strong economy even as some industries reduce payrolls. Overall, the income gains and positive economic fundamentals will continue to support an elevated demand for quality housing. Heading into the summer months, it would not be a surprise if sales, active listings and pricing all increased.
