San Francisco

How did the spur of IPOs impact Bay Area housing markets?

 

economic-straight-talk

Executive Summary:

  • Higher-end sales (above $3 million) surged in the second quarter to last year’s historical peaks.
  • Home prices remained flat in the second quarter, except in San Francisco and San Mateo.
  • For-sale inventory growth slowed considerably, especially in San Francisco. Inventory remains at 50 percent of the last housing boom.
  • Tax reform is likely putting a damper on the market by dragging down sales priced between $1 million and $2 million.

It was a significant quarter, at least when comes to the IPO activity in the Bay Area. According to Pitchbook, total venture-backed exit value for the first half of 2019 reached $188.5 billion, exceeding every full-year total on record. San Francisco companies ranked in the top four out of five IPOs in exit value including Uber, Slack, Pinterest, and Zoom Video Communications, but also a few others.

But, what did that mean for the Bay Area housing markets in the second quarter? Below is a list of the top four trends that are worth noting for the quarter.

1. Higher-end sales surged. While the total number of homes sold in the second quarter trended below last year by about 5 percent, higher-priced sales, above $3 million, surged again bringing second quarter sales in line with last year’s historical peak. Figure 1 illustrates the 4-year trend of sales of homes priced above $3 million. There were in total about 672 sales between April and May compared to 675 sales last year. Note, though, that sales over $3 million declined about 25 percent in the first quarter before rebounding in the second quarter.

Unlike last year when higher-end sales were popular in Santa Clara and to some extent Sonoma and Contra Costa, this year buyers were more interested in higher-priced homes in Alameda, San Francisco, San Mateo, and Napa. Figure 2 illustrates changes in home sales by price range compared to the second quarter last year.

Out of all homes sold over $3 million, the majority are still in Santa Clara, followed by San Mateo and San Francisco. But Alameda saw a 39 percent jump over last year, followed by a 25 percent jump in Napa, 17 percent in San Mateo and 14 percent in San Francisco. Note that higher-end sales in Alameda still only account for 6 percent of total sales over $3 million.

Figure 1 – 3-month moving average of sales over $3 million

Source: Source: Terradatum, Inc. from data provided by local MLSes, July 7, 2019

Figure 2 – Quarterly year-over-year change in home sales by price range

Source: Source: Terradatum, Inc. from data provided by local MLSes, July 7, 2019

2. Home prices remained flat in the second quarter, except in San Francisco and San Mateo. As noted in previous analyses, home prices in the Bay Area reached a cyclical high last May when the median price topped at $1 million. Since, the prices followed seasonal declines reaching the lowest point in January and have increased since. Figure 3 illustrates Bay Area median home price trend over the last 3 years, pointing to seasonal highs around May-June and troughs in January. Second quarter 2019 is highlighted in red illustrating flattening of home prices in recent months.

Further, Table 1 summarizes current median prices, June year-over-year changes, and year-to-date changes by region. Year-to-date account is most interesting in that it suggests generally flat prices across the Bay Area, except in Santa Clara and Sonoma where prices retracted. Those two regions saw unsustainable growth in prices at the beginning of last year. San Francisco and San Mateo, while flat year-to-date have seen some price acceleration in June with both posting a 4 percent increase year-over-year. Prices in the two areas have again reached historical highs.

Changes in Table 1 also closely reflect the forecast that was presented at the Pacific Union Real Estate Economic Forecast 2020, illustrated in Figure 4. The forecast called for home prices reaching a “Table Top” in 2019-2020 — when prices reach peaks and remain relatively flat with some slight declines in a few areas. As Figure 4 shows, “Table Top” is much different than the “Mountain Peak” that was experienced during the last housing cycle in 2004 to 2007 when home prices rapidly declined as much as 60 percent following the peak. The reasons prices are expected to remain flat this time around is largely due to exceptionally solid mortgage loan underwriting and a significant share of all-cash purchases, coupled with almost negligible new construction growth. Thus, while it’s inevitable to evoke the 2004-2007 period when thinking about home prices going forward, keep in mind that the last housing cycle was considerably different, driven by demand and supply of low-quality loans and a loosely regulated mortgage system, and excess new construction that was absorbed by speculative buying and highly indebted households. Much has changed since. Today’s mortgage system is well capitalized and follows strict Dodd-Frank reform, new construction is roughly 50 percent below the 2004 period and homeowners have a total of about $5.8 trillion in available home equity, the highest volume ever recorded and 16 percent above the last home price peak in 2006. Further, venture-capital activity remains steadily anchored to the Bay Area region, which will continue fueling local economy going forward.

Figure 3 – Bay Area 8-county median home price trend

Source: Source: Terradatum, Inc. from data provided by local MLSes, July 7, 2019

Table 1

Source: Source: Terradatum, Inc. from data provided by local MLSes, July 7, 2019

Figure 4 – John Burns Home Value Index Forecast

Source: Pacific Union International Real Estate Economic Forecast, San Francisco Bay Area to 2020

3. For-sale inventory growth slowed considerably. While overall inventory is about 11 percent ahead of last year, inventory growth and addition of new listings has slowed, suggesting that acute lack of homes for sale continues to hang over Bay Area housing markets. Figure 5 illustrates availability of homes for sale in the Bay Area’s eight-county region going back to 2005. Since 2012, when much of the for-sale inventory was absorbed, inventory levels dropped to about 50 percent of the levels seen between 2005 and 2010. Continued lack of inventory further supports our forecast of flattened home prices over the next couple of years.

Figure 5 Bay Area homes for sale, monthly

Source: Source: Terradatum, Inc. from data provided by local MLSes, July 7, 2019

4. Lastly, tax reform is likely putting a damper on the market by dragging down sales priced between $1 million and $2 million. While the quarter ended with 5 percent fewer sales than last year, or 876 fewer sales, 84 percent of the decline, or 738 units, was due to fewer homes sold priced between $1 million and $2 million. Table 2 summarizes quarterly year-over-year change by price range.

In contrast, sales of units priced below $1 million, similarly to sales over $3 million, remained flat from last year, with gains in Alameda, Santa Clara, and Wine Country offsetting losses in San Francisco and the Peninsula mainly due to no inventory in the lowest price range.

As discussed at the Pacific Union Real Estate Economic Forecast 2020, tax reform which capped state and local deductions to $10,000, and reduced the mortgage interest deduction of a loan up to $750,000 from the previous $1 million cap, significantly increased the cost of owning a home in California. And in the Bay Area, where homes priced between $1 million and $2 million are not considered luxury homes, households that relied on the deductions to be able to afford a home are having a hard time reconciling the purchase.

Table 2

Source: Source: Terradatum, Inc. from data provided by local MLSes, July 7, 2019

Going forward, home buyers could be facing an easier time. Mortgage interest rates have eased from their winter highs and may continue to trend lower depending on forthcoming actions of the Federal Reserve. Nevertheless, according to Freddie Mac’s Primary Mortgage Market Survey, the U.S. weekly average 30-year fixed mortgage rate was at3.75 percent this week, already the lowest since January 2018 (Figure 6).

Figure 6 – U.S. weekly average 30-year fixed mortgage rate

Source: Primary Mortgage Market Survey, Freddie Mac

 

June U.S. Jobs Report: Continued strength lowers expectations of Fed cut in July

 

economic-straight-talk
  • As all eyes are on the Federal Reserve andtheir anticipated actions in the upcoming July, September and Decembermeetings, including President Trump’s. This monthly job report has become oneof the most observed monthly economic indicators. Consequently, strength inJune’s hiring suggests some analysts may have rushed to push for a case ofcutting the interest rates.
  • However, while the markets have beenaggressive in trying to drive Federal Reserve’s actions, Federal Reserve is ina precarious position at the moment. Fed Chair Powell has suggested thatdeteriorating inflation expectations and slowing global growth may provide acase for cutting the rates, though the Fed does not want to appear to be bowingto short-term political interests. Further, premature rate cuts may leaveFederal Reserve with fewer tools when the economy indeed hits the brake. Analystsare sticking with the 25 basis points cut expectation for the July FOMCmeeting.
  • In terms of housing, however, it is not clearhow much further decline in rates would boost the demand. The 30-year fixed mortgage rates have beenoscillating about 70 to 100 basis points below this time last year, but thenumber of homes sold in California still trends below last year.
  • In looking at the BLS report, the unemploymentrate inched up to 3.7 percent as 2019 graduates and summer workers entered thelabor force. Consequently, wage growth also also posted a relatively weakermonthly growth of 0.2 percent though it is still up 3.1 percent from last year.Again, these numbers suggest that there is a little risk of inflation which isactually one of the primary reasons Federal Reserve would cut the rate as theyare concerned with lack of inflationary pressures amid lowest unemployment ratein the last 50 years.
  • Further, while the rate of job growth hasgenerally slowed from last year, as anticipated, it’s not very clear if tradeuncertainty has started to weigh on key trade-related sectors, such as manufacturingand transportation & warehousing, which added a combined 41,000 jobs, an uptickfrom the trend in the last few months. However, while trade uncertainty is likelyto weigh most heavily on investment spending, uncertainty in general is neverseen as a positive when comes to businesses’ hiring plans.
  • Notable gains continue in professional and businessservices which added 51,000 jobs, and health care, up 35,000 jobs, while retailcontinued on the losing streak with a 5,800-jobs cut in June.
  • According to a new CompTIAreport, the information-technology sector added 13,500 jobs in June, withsolid gains in technology services, custom software development and computersystems design, up 7,200 jobs, and computer and electronics productsmanufacturing, up 6,500. The bulk of the new hiring in manufacturing occurredin two areas, electronic instruments and semiconductors and electroniccomponents. Software and application developers continue to be the mostin-demand occupation companies are looking to hire, with 83,700 job postings inJune.

 

California on track for longest job expansion in recorded history

 

economic-straight-talk
  • California added 19,400 jobs in May bringing theunemployment rate down to 4.2 percent, according to the latestreport from the state Employment Development Department. The lowestunemployment rate, 4.1 percent, was seen in second half of 2018.
  • Current job growth is at a 111-month expansion —the second-longest since 113-month expansion of 1960s.
  • With 282,700 jobs added over the last year, the1.6 percent pace of employment growth lines up with the growth rate nationally.Still, California’s 19,400 jobs gain accounted for a lion’s share of nationalmonthly job growth, contributing 26 percent.
  • While the state’s unemployment rate declinedslightly in May, the driver is unfortunately declining labor force whichdeclined by 49,800 in May, following a 51,800 decline in April. On an annualbasis, labor force showed only a small improvement of 136,400 or 0.7 percentgrowth.
  • In May, 7 out of 11 industries added jobs, withlargest gain in construction (12,800), suggesting increase in new homeconstruction. The second largest gain was in leisure and hospitality, up 4,500jobs, and government, up 1,800 jobs. In annual comparison, there is arelatively consistent growth in education health services followed byprofessional and business services, and a loss in financial services.
  • Regionally, Los Angeles continued with thelargest job gains adding 8,200 between April and May, with gains largely inleisure and hospitality, a seasonal gain that also reflects the strength of thearea’s tourism industry. Employment services reflected another large gain, up4,600 jobs. Within construction’s gains, the largest relative increase wasamong building finishing contractors, up 4 percent over the month, and 15.2percent over the year. Information sectors, mostly driven by motion picture andsound recording, showed the largest monthly declines, while finance andinsurance have seen the largest overall annual declines, down 3,400 jobs intotal year-over-year. The region’s employment growth over the year remainsfocused in health care and social assistance, which account for about 30percent of the growth.
  • In the Bay Area, gains were broad based acrossthe regions, and most regions saw the unemployment rate decline again fallingbelow the year-ago bottom. In San Francisco-San Mateo region, up 7,100 jobs, monthlygains were led by accommodation and food services, construction, and financialservices, with a loss in private education and health services. Over the year,the region gained 44,900 jobs.
  • In Santa Clara-San Benito region, up 4,900 jobs,gains were also led by leisure and hospitality as summer seasonal hiring kickedin. The region also saw strong gains in information and professional services.Over the year, job gains in information and computer and electronic productmanufacturing suggests the area continues to be a big draw for tech innovation.
  • Alameda and Contra Costa counties added 6,100jobs in April, with construction’s specialty trade contractors leading thegain. Over the year, the area added 19,100 jobs with over a third in healthcare and social assistance, followed by a similar gain in professional andbusiness services
  • In Marin, Napa and Sonoma counties, unemploymentrate also declined dropping to lowest rates since May 2018. However, fallingunemployment rates are due to declining labor force which was down 0.6 percentin Sonoma year-over-year, down 1.2 percent in Napa, and mostly flat inMarin.
  • Figure 1 summarizes annual changes inemployment, number of jobs added in high-income sectors, and the share of totaljobs that were high income jobs by region.
  • Column titled Percent in High Income Sectorsillustrates how many of the jobs added in each region were in high incomesectors, which include financial activities, professional and businessservices, and information sector. In San Francisco and San Jose metropolitanareas, about 50 percent of job growth is in high-income sectors which contrastnotably other regions, particularly Los Angeles where the diverse economy stillhasn’t gained traction with higher-income employment growth.

Figure 1

Notes:

East Bay Area includes Alameda and Contra Costa counties

Los Angeles includes Los Angeles County

San Francisco incudes San Francisco, Marin, and San Mateo counties

San Jose includes Santa Clara and San Benito counties

 

Plenty of Bay Area buyers, but why are they hesitant?

 

economic-straight-talk

Executive Summary:

  • While April’s momentum is slightly slower inMay, May sales are still only 2 percent below last year’s highs afterdouble-digit declines earlier in the year.
  • Home sales momentum remains solid in East Bay.Napa sales finally jumped 6 percent after a 6-month losing streak, averaging 20percent annual declines.
  • Affordable sales picked up again with sales ofhomes priced below $1 million up 3 percent year-over-year, the first two-monthconsecutive annual increase in the last four years.
  • For-sale inventory growth is slowing after thewinter jump with homes averaging seven days longer on the market.
  • San-Francisco continues to see significantinventory declines with May down 19 percent YOY (four months of declinesaveraging 20 percent).
  • Buyer competition picks up again with 58 percentof homes selling over the asking price.
  • Bay Area housing market correction resembles “TableTop” with prices remaining flat, compared to “Mountain Top” seenin the last cycle when prices fell significantly following the peak.

Following a solid improvement in the Bay Area housing marketsin April, May homes sales activity continued with the momentum, albeit slower.Total home sales were 2 percent below last May, following April’s upwardlyrevised 1 percent year-over-year decline. The rate of declines has slowedconsiderably after double-digit declines seen in the first few months of 2019. Takingthe first five months of the year together, sales are 5 percent below lastyear.

However, while declines continue to be driven by slowersales in Santa Clara and San Mateo, East Bay home sales are keeping themomentum. Napa sales jumped 6 percent after a 6-month losing streak, averaging20 percent annual declines. San Francisco, the spotlight of expectations aroundIPO impacts, remained relatively flat with last year, down 1 percent, thoughSan Francisco sales peaked last May at the highest numbers of May sales in atleast the last four years. Overall, most all markets except Sonoma sawimprovement in sales in at least one price range. Table 1 summarizesyear-over-year changes in the number of homes sold by price range.

Table 1

Source: Source: Terradatum, Inc. from data provided by local MLSes,June 7, 2019

As noted in last month’s analysis, the most encouragingimprovement considering Bay Area’s affordability concerns is the increase insales of homes priced below $1 million, which showed its first two-monthconsecutive annual increase in the last four years. Figure 1 illustrates thetrend of year-over-year changes in home sales by price range.  As Table 1 suggests, the increase in lowerpriced sales is mostly driven by East Bay, but also Santa Clara where lowerpriced sales have been increasing since the beginning of the year after dropsaveraging 40+ percent in 2018.  Incontrast, San Mateo, San Francisco and Marin continued to see declines in lowerpriced sales as that inventory has largely disappeared – for example, in thethree regions, less than a third of homes available for sale are priced below$1 million.

Figure 1 Year-over-year change in the number of homes sold

Source: Source: Terradatum, Inc. from data provided by local MLSes,June 7, 2019

The increase in lower priced homes has been helped byraising inventories of lower price ranges. Figure 2 traces out the trends ininventory growth over the last couple of years. Currently, available inventorylevels are on average 15 percent above last year with inventories priced over$3 million continuing to increase at a relatively faster pace, followed byincrease in inventory priced between $1 million and $2 million. Inventory ofhomes below $1 million has slowed from the winter jump, but still remain atdouble-digit growth. Nevertheless, while inventory growth is steady, it’slargely due to homes taking longer on the market rather than new listings becomingavailable. The rate of new listings has fallen significantly since the winterjump, particularly for lower priced homes. To see the aging of for-sale inventories,Table 2 summarizes average days on market for homes that were still availablefor sale on May 31.  On average, currentinventory has been on the market for 47 days, or at least 7 days longer thanlast.

Figure 2 Year-over-year change in number of homes for sale by price range

Source: Source: Terradatum, Inc. from data provided by local MLSes,June 7, 2019

Table 2

Source: Source: Terradatum, Inc. from data provided by local MLSes,June 7, 2019

Furthermore, while buyer competition is not at the samelevel as last summer, when housing market activity peaked, it continues to rampup from slower start to 2019. Seasonally, buyer competition peaks in May with thehighest rate of homes selling over the asking price in a given year. This May,almost 6 in 10 homes sold over the asking price, which is below the last threeyears when about 7 to 8 in 10 homes sold over the asking price, but stillsuggest solid buyer demand. Figure 3 illustrates the trend in the share ofhomes selling over the asking price. Regionally, the difference from last Mayhas been smallest in San Francisco, where 72 percent of homes are still sellingover the asking price, down from 75 percent last May. The most notable declinein buyer competition remains in Santa Clara where 56 percent of homes areselling over the asking price, down from 89 percent.

Figure 3 Share of homes selling over the asking price

Source: Source: Terradatum, Inc. from data provided by local MLSes,June 7, 2019

As noted in the last month’s analysis, San Francisco’shousing market resilience remains further evident in absorption rates ofavailable inventory, which is up 8 percent points compared to last May and isthe only area where absorption rate has increased on an annual basis. Granted,San Francisco is also the only region where inventory continues to decline,down 19 percent in May. This brings us to the question around the impact of recentand anticipated IPOs. While it doesn’t appear that San Francisco housing isbubbling out of control, it is difficult to say where it would be in thecounterfactual. In other words, would the market currently be worse off orsimilar to where it is if it wasn’t for the IPO expectations?

In the least, it is clear that the strength of the Bay Area economy and continued job growth is driving solid demand from buyers across the region, both for affordably priced homes as well as higher-priced homes. And while the number of sales is lower than last year, it is important to keep in mind that last summer housing market activity peaked, and current conditions are suggesting leveling off or normalization of those unsustainable trends, particularly in areas in Silicon Valley or post-fire Sonoma. Further, buyers, may are holding off fearing that housing market correction is inevitable and are waiting for sellers to yield further and lower their expectations. And while recent softening of price growth suggest correction is under way, it is unlikely that it will be the correction that we saw in the last housing cycle. Credit conditions are significantly different than in the last cycle. The current housing boom was driven by exceptionally solid underwriting and significant share of all-cash purchases, coupled with almost negligible new construction growth, both of which suggest that the correction path is looking notably different. In the Pacific Union Real Estate Economic Forecast 2020. “Table Top” is unlike the “Mountain Peak” seen during the last housing cycle in 2004 to 2017 when home prices rapidly declined as much as 60 percent following the peak.

Figure 4  John Burns Home Value Index

Source: Pacific Union International Real Estate Economic Forecast, San Francisco Bay Area to 2020

 

Compass May 2019 Bay Area Real Estate Update

While overall Bay Area pace of sales in May still trends 2 percent below last year’s levels,some regions are starting to see sales pace pick up ahead of last year. Sales below $1 million are up for the second month in a row after more than 20 months of annual declines.


CONTRA COSTA COUNTY

At $1.3 million, May median sales price in Contra Costa County retrieved from the previous month’s high, but still continues to trend ahead of last summer. Days on market continued to trend lower with homes selling as fast as they did at the same time last year, averaging 18 days on the market. See Contra Costa County market statistics for May.

Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk,Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, andWalnut Creek. Sales data in the adjoining chart includes single-family homes in these communities.


EAST BAY

While retrieving slightly from the previous month’s peak, median home prices in the East Bay in May remained ahead of last year, at $1.2 million. The pace of sales activity also picked up again with homes selling on average in 17 days, only a day longer than the 16-day average seen last spring. See East Bay market statistics for May.

Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609,94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito;Kensington; and Piedmont. Sales data in the adjoining chart includes single-family homes in these communities.


MARIN COUNTY

At $1.45 million in May, Marin County median home prices continued the recent trend of monthly increases but still fall slightly short of last May. Pace of sales also picked up slightly from previous months though taking a few days longer at the same time last year. See Marin County market statistics for May.

Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera,Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the adjoining chart includes single-family homes in these communities.


NAPA COUNTY

After a slow winter season, Napa County‘s May median sales price picked up pace again and increased 2.8 percent above last year, to a median of $725,000. Homes continued to sell at a faster pace, averaging 56 days before entering into a contract, only 2 days longer than last May. See Napa County market statistics for May.

Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the adjoining chart includes all single-family homes in Napa County.


SAN FRANCISCO — SINGLE-FAMILY HOMES

Median home prices for single-family homes continued with a strong upward trend, bringing San Francisco‘s May median prices to $1,697,500. Number of homes under contract also continued to accelerate with almost 50 percent of homes available for sale being under contract. See San Francisco single-family-home market statistics for May.


SAN FRANCISCO — CONDOMINIUMS

At $1,250,000 median sales price, San Francisco condominiums trended only slightly below last year’s median price mostly reflecting the change in types of units being sold. Buyer activity remains strong and the share of units under contract picked up again, up 8.1 percent points year-over-year to 37.7 percent. See San Francisco condominium market statistics for May.


SILICON VALLEY

Silicon Valley median prices picked up in recent months and reached $3,350,000 in May, 1.5 percent ahead of last May. Buyers otherwise remain more restrained than last year, taking longer to decide to purchase, leading to an average of 27 days on market. See Silicon Valley market statistics for May.

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities and towns of Atherton, LosAltos (excluding county area), Los Altos Hills, Menlo Park (excluding east ofU.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the adjoining chart includes all single-family homes in these communities.


Mid-Peninsula Subregion

The median sales price in the Mid-Peninsula continued to trend lower in May compared to last year. Homes under contract were down 6.3 percent with average days on market 10 days slower. See Mid-Peninsula market statistics for May.

Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame(excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales data in the adjoining chart includes all single-family homes in these communities.


SONOMA COUNTY

Sonoma County’s median homes prices continued their monthly increase after some bumpy winter months reaching $665,000 in May, or 4.4 percent below last year. Pace of home sales also continues to improve averaging 54 days in May, 9 days more than last year. See Sonoma County market statistics for May.

Defining Sonoma County: Sales data in the adjoining chart includes all single-family homes and farms and ranches in Sonoma County.


SONOMA VALLEY

Median home prices in Sonoma Valley picked up in May after relatively flat at the beginning of the year, reaching $905,000. The pace of home sales also improved notably bringing the average days on market to 45 days. See Sonoma Valley market statistics for May.

Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the adjoining chart refers to all residential properties– including single-family homes, condominiums, and farms and ranches – in these communities.


LAKE TAHOE/TRUCKEE — SINGLE-FAMILY HOMES

Median prices of single-family homes in Lake Tahoe/Truckee has been oscillating over the last year and reached almost $727,000 in May, down 2.1 percent from last year. Pace of sales has slowed somewhat averaging 75 days, 13 days more than last year. See Lake Tahoe/Truckee single-family-home market statistics for May.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, NorthShore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee,and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes single-family homes in these communities.


LAKE TAHOE/TRUCKEE — CONDOMINIUMS

Median home prices of condominiums in Lake Tahoe/Truckee has trended slightly lower in recent months bringing the May median sales price to $423,500, about 1.4 percent below last year. The pace of condominium sales has slowed more significantly, averaging 104 days in May, though these sales vary considerably throughout the year. See Lake Tahoe/Truckee condominium market statistics for May.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region include the communities ofAlpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, NorthShore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee,and the West Shore of Lake Tahoe. Sales data in the adjoining chart includes condominiums in these communities.

 

Jobs Report: California sees largest monthly gain in two years

 

economic-straight-talk
  • According to the latest report from the state Employment Development Department, California added 46,000 jobs in April – the largest monthly gain since March 2017.
  • While monthly job additions have varied a lot since the beginning of the year, California led all states in the monthly increase. The state has added 271,600 jobs over the last year, which is a 1.6 percent year-over-year increase – slightly behind the 1.8 percent overall national growth rate.
  • The state’s unemployment rate remained steady at 4.3 percent in April. Labor force declined, however, by 52,200 in April, after some solid increases in first three months of the year. Compared to a year ago, the labor force has increased by 203,900 people.
  • With 46,000 jobs added over the month, 9 out of 11 industries added jobs in January, with largest gains in educational and health services, up 17,300 jobs, followed by leisure and hospitality, up 12,100 jobs. Information and minting and logging posted monthly losses.
  • In annual comparison, 10 out of 11 industries added jobs with health services showing the largest gains, up 78,800 jobs, followed by professional and business services, up 66,900 jobs. Only financial activity posted an annual loss of 2,700.
  • Regionally, Los Angeles finally showed a rebound after a rocky start to 2019. Los Angeles County added 19,300 jobs over the month and 56,100 over the year. The region’s labor force, however, declined by 20,000 which is not encouraging for hiring trends going forward. Nevertheless, monthly gains were largely focused in leisure and hospitality, with a larger than usual seasonal addition. Construction also saw above-average April gains bringing the sector’s employment to the highest level in more than a decade. On the annual basis, the health and well being of an aging population continues to influence large gains. Job additions in healthcare and social assistance, up 18,800, accounted for ninety-two percent of the overall sector job growth to reach a new all-time high. On the other hand, losses were focused in financial
    services, particularly, finance and insurance, though apparel manufacturing was down as well.
  • In the Bay Area, gains were broad based across the regions and most regions saw unemployment rate decline again falling below the year-ago bottom. In San Francisco-San Mateo region, up 5,000 jobs, monthly gains were led by healthcare job additions, followed by leisure and hospitality, and solid gains in information.
  • In the Santa Clara-San Benito region, up 6,400 jobs, gains were also led by leisure and hospitality, but also specialty trade contractors, and information. Computer and electronic product manufacturing posted 1,100 losses.
  • In Alameda and Contra Costa, up 6,800 jobs, similar trends followed with healthcare and social assistance leading the gains followed by leisure and hospitality.

Compass NorCal April 2019 Real Estate Update

While pace of sales in
April still trends below last year’s levels in most Bay Area regions in which
Compass (reflecting the company formerly known as Pacific Union) operates, there
are signs that buyers are returning, and sales activity is picking up. Click on
each of our regions below for an expanded look at local real estate activity in
April.

CONTRA
COSTA COUNTY

April median sales price in Contra Costa County picked up from the previous three months and leveled out with last year at $1,325,000. After slower winter months and longer days on market, homes are selling relatively faster, though still slightly slower than last year. See Contra Costa County market statistics for April.

Defining Contra Costa County: Our
real estate markets in Contra Costa County include the cities of Alamo,
Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San
Ramon, and Walnut Creek.


EAST BAY

Median home price in the East Bay in April picked up pace again reaching another peak at $1,246,500, up 10.8 percent above last year’s April price. Pace of sales activity also picked up with homes selling an average of 19 days, slightly above last year’s 17-day average. See East Bay market statistics for April.

Defining the East Bay: Our real estate markets in the East Bay region include
Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda;
Albany; Berkeley; El Cerrito; Kensington; and Piedmont.


MARIN
COUNTY

Marin County home prices remained relatively flat in April compared to last year, ending at $1,388,000. The pace of home sales accelerated again with homes generally selling in about 32 days, slightly faster than last year. See Marin County market statistics for April.

Defining Marin County: Our real estate markets in Marin County include the cities
of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill
Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.


NAPA
COUNTY

After a slow winter season, Napa County April median sales price picked up pace again and increased 6.1 percent above last year, to a median of $700,000. Also, homes continued to sell at a faster pace than in the previous year, with an average of 49 days on the market before entering into a contract. See Napa County market statistics for April.

Defining Napa County: Our real estate markets in Napa County include the cities of
American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and
Yountville.


SAN
FRANCISCO — SINGLE-FAMILY HOMES

Median home prices for single-family homes jumped in April  following a seasonal decline, bringing San Francisco April’s median prices to $1,632,000. The number of homes under contract, however, accelerated notably reflecting anticipations over IPO impacts. See San Francisco single-family-home market statistics for April.


SAN
FRANCISCO — CONDOMINIUMS

At $1,222,000 median sales price, San Francisco condominiums trended slightly below last year’s median price which is mostly a function of an increase in sales of smaller units. However, buyer activity is picking up notably with an 11 percent point increase in number of units under contract compared to last year. See San Francisco condominium market statistics for April.


SILICON
VALLEY

Silicon Valley median prices continued to show some weakness in April compared to last year, however the area saw a large jump in home prices last spring. Overall, buyers are continuing to see more homes to choose from and less buyer competition. See Silicon Valley market statistics for April.

Defining Silicon Valley: Our real estate markets in Silicon Valley include the cities
and towns of Atherton, Los Altos (excluding county area), Los Altos Hills,
Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside.

MID-PENINSULA SUBREGION

The median sales price in the Mid-Peninsula continued to trend lower in April compared to last year, however year-over-year declines are diminishing following very slow winter months. Buyers are returning, however, causing a 4 percent point increase in homes under contract compared to last April. See Mid-Peninsula market statistics for April.

Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion
include the cities of Burlingame (excluding Ingold Millsdale Industrial
Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore
Cavanaugh area).


SONOMA
COUNTY

At $645,000, median home prices in Sonoma County remain below last year’s post-fire peaks but are still ahead of prices seen before the fires. Pace of sales has also picked up to an average of 42 days which is back to rates seen before the fires. See Sonoma County market statistics for April.

Defining Sonoma County: Sales data in the adjoining chart includes all single-family
homes and farms and ranches in Sonoma County.


SONOMA
VALLEY

Median home prices in Sonoma Valley stood at $718,000 in April, holding relatively steady over the last few months but down last year’s April peak led by post-fire activity. However, homes are selling faster than last year, averaging 35 days on the market, down 13 days from 48-day average last April. See Sonoma Valley market statistics for April.

Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities
of Glen Ellen, Kenwood, and Sonoma.


LAKE
TAHOE/TRUCKEE — SINGLE-FAMILY HOMES

At $755,000, median prices of single-family homes in Lake Tahoe/Truckee maintained below last year’s peak which was driven by a number of luxury new construction sales. However, solid buyer demand is evident in shorter days on market which averaged 70 days in April, down from 86 days last year. See Lake Tahoe/Truckee single-family-home market statistics for April.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region
include the communities of Alpine Meadows, Donner Lake, Donner Summit,
Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe
City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe.


LAKE
TAHOE/TRUCKEE — CONDOMINIUMS

At $450,100, condominium prices in the Lake Tahoe/Truckee region picked up from winter lows, but still trend 6.2 percent below last year. Pace of sales has also picked up in April following the winter lull to an average of 109 days on the market, which is still about 30 days below last year pace. See Lake Tahoe/Truckee condominium market statistics for April.

Defining Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region
include the communities of Alpine Meadows, Donner Lake, Donner Summit,
Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe
City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe.

 

Bay Area housing market shifting in anticipation of IPO demand

 

economic-straight-talk

Executive Summary:

  • IPO expectations are already showing up in home
    sales activity, particularly in San Francisco and San Mateo
  • Sales of homes in San Francisco, San Mateo and
    Alameda have solidly exceeded last year – up 7 percent, 4 percent and 2 percent
    respectively year-over-year in April
  • Santa Clara, Wine Country and Contra Costa remain
    slower compared to last year
  • Homes priced between $1 million and $2 million
    continue to struggle, except in San Francisco and San Mateo, likely a result of
    tax reform changes and reduced state and local tax (SALT) and mortgage interest
    deductions
  • Nevertheless, sales of homes priced above $3
    million have surged again, posting a 5 percent year-over-year increase, matching
    last year’s peaks
  • While growth in inventory of homes for sales is
    broad based, availability of homes priced above $3 million accelerated again to
    a 26 percent annual growth in April
  • While price growth remains flat in most regions,
    San Francisco median prices up 2 percent year-over-year in April
  • A 9 percent annual increase in homes under
    contract suggests buyers are back in droves, especially for homes priced over
    $3 million, up 44 percent year-over-year

While overall Bay Area housing market activity continued to
post a year-over-year decline in April, the 4 percent decline was the smallest
since July of last year. The decline was driven by fewer sales in Santa Clara
County and Contra Costa, with a smaller contribution from the wine country. San
Francisco, San Mateo and Alameda, in contrast, posted solid year-over-year
increases, putting their April sales at the highest levels in three years. Table
1 shows year-over-year April changes in the number of homes sold by price
range, further highlighting some interesting trends.

First, while sales of homes priced below $1 million trend
slightly below last year, most regions are seeing an increased activity
compared to last year, particularly South Bay, Marin and Alameda. Contra Costa
is actually the driver behind the decline of 1 percent, given the relative size
of the county and the number of homes sold compared to the entire Bay
Area.

Second, the segment of the market that continues to struggle
are homes priced between $1 million and $2 million, except in San Francisco and
San Mateo, which is not surprising in lieu of IPO expectations. Weakness in
this price segment is likely a result of tax reform changes and reduced SALT
and mortgage interest deductions, which are potentially a big concern for
would-be buyers in this price range.

Third, the higher priced market, above $3 million, bounced
back to a 5 percent annual increase after significant declines in the previous six
months. The jump is mostly due to the tri-region of San Francisco, San Mateo
and Marin, where sales accelerated compared to last year. As noted in previous
analyses, sales of homes priced above $2 million were growing at a rate of 50
percent in early 2018, thus April’s flat change for homes in the $2 to $3
million range, and a 5 percent increase for homes $3M+ put higher-end sales
back on track with 2018 highs.

Table 1

Source: Source: Terradatum, Inc. from data provided by local MLSes, May 7, 2019

For-sale inventory continues to offer more options for
potential buyers across the Bay Area and at different price ranges, except in
San Francisco where inventory continues to decline at double digit rates. Table
2 summarizes changes in inventory by price range and region. Overall, there are
about 2,500 more homes on the market compared to last April, an 18 percent
increase. While all price ranges are posting a relatively similar percent
increase, growth in inventory of homes priced above $3 million has accelerated
in recent months, from low single digits over the last year, to a 26 percent
annual growth in April. As Table 2 depicts, most of the increase comes from
Santa Clara and San Mateo, but is also impacted by Sonoma which continues to
see more inventory after the initial post-wildfire shortage. While recent
increases in Santa Clara seem large and draw attention, the area suffered the lowest
inventories in a decade in 2018, so recent jumps put inventories only slightly
above 2017 levels.

Table 2

Source: Source: Terradatum, Inc. from data provided by local MLSes, May 7, 2019

Furthermore, anticipation of the impact of recent and
upcoming IPOs is influencing Bay Area housing market, particularly in San
Francisco where absorption rates of available inventory jumped to 40 percent in
April, up 9 percentage points from 31 percent last April –  now at the highest rates since late 2016. The
other regions continued to see lessened absorption rates with inventory priced
between $1 million and $2 million generally seeing the largest declines in
absorptions, though this price range saw large increases in available inventory
in recent months. Again, the impact of tax reform is having an impact on demand
of homes priced between $1 and $2 million. In contrast, absorption of inventory
priced below $1 million has picked up in San Mateo as well as San Francisco,
and San Mateo saw a 10 percentage point jump in absorption to 44 percent — now the
highest absorption rate of the lower price ranges in the region. Note, though,
that absorption rates are relative to increased inventories across the region.

In addition, while overall median price growth continues to
trend sideways in the Bay Area, not showing any growth on a year-over-year
basis in 2019, San Francisco median prices were up 2 percent year-over-year in
April. Santa Clara and Sonoma, which led the region with relatively higher
annual declines in prices so far in 2019, showed some improvement in April with
slowing declines compared to previous months. However, as shown in Figure 1,
even without the price growth, Bay Area median prices are only slightly below
March 2018 when the run-up in prices accelerated, and well above median prices
prior to the run-up.

Figure 1
Median Home Prices in the Bay Area and San Francisco

Source: Source: Terradatum, Inc. from data provided by local MLSes, May 7, 2019

Lastly, while the Bay Area housing market has started picking up in bits and spurs, April’s look into the increase in number of homes under contract suggests strong home-buying months ahead. Table 3 summarizes April year-over-year changes by region and price range. Overall, number of homes under contract in April increased 9 percent compared to last April with most all regions seeing the annual jump. The increase is particularly notable among homes priced above $3 million, which are 44 percent ahead of last year. In other words, there were 239 homes in contract in April, up from 166 last April. Again, it is reassuring that the increase in buyer activity is spreading throughout the whole Bay Area and across price ranges. Not unexpectedly though, buyers have been encouraged by favorable mortgage interest rates, more choices, and an influx of IPO.

Table 3

 Source: Source: Terradatum, Inc. from data provided by local MLSes, May 7, 2019

 

March U.S. Jobs Report: Are we in a Goldilocks Economy?

 

economic-straight-talk

A Goldilocks Economy is an economy that is neither too hot or cold, in other words, it sustains moderate economic growth and has low inflation, which allows a market-friendly monetary policy.

  • Notable job gains continue to bolster professional and business services (up 76,000 jobs), which comprised about one fifth of last year’s employment  growth. Other sectors experiencing notable growth include construction (up 33,000 jobs), healthcare (up 27,000 jobs), and social assistance (up 26,000 jobs). Retail trade employment, particularly in general merchandise stores, are continuing to weaken.
  • According to a new CompTIA report, the information-technology sector added 18,900 jobs in April, with hiring in technology services, custom software development and computer systems design leading April job growth. Software and application developers continue to be the most in-demand talent companies are looking to hire, with 78,000 job postings last month.
  • The unemployment rate, falling to 3.6 percent, hit another 50-year low (the lowest rates since 1969). Nevertheless, the decreased unemployment rate primarily stemmed from a drop in labor force participation, which has been improving in recent years but was inevitably going to decline due to demographic factors like retiring baby boomers and lack of population growth. In addition, immigration of foreign-born workforce has slowed dramatically. Over the past 10 years, immigration has been a significant contributor to the domestic labor force, accounting for half of labor force growth. While labor force participation among women has returned by to pre-recession rates, male participation rates are still well below. Women’s participation has been fueled by growth in industries that generally employ a higher share of women, such as healthcare and education, while men’s participation has been held back by a decline in manufacturing jobs and factors such as the opioid crisis and lower graduation rates than women.
  • Wage growth has inched up, 0.1 percent, in line with expectations, but still relatively subdued at this point of the labor market cycle. A recent surge in productivity is one of the main arguments for the lack of compensation growth. Overall, labor income is running at about 4 percent annualized growth rate. However, low inflation is helping improve real wages and will keep bolstering consumer spending.
  • Nevertheless, low inflation is the reason the Federal Open Market Committee (FOMC) decided to keep the fed funds rate unchanged earlier this week. The FOMC’s decision was largely based on slower growth in household spending and business fixed investment, and consequently lack of overall inflation which the FOMC believes will remain muted. While March’s decision to keep the funds rate unchanged was primarily due to concerns over lack of global growth, their most recent statement shifted the concern to low inflation expectations.
  • FOMC is expecting to see continued economic growth through 2019 supported by a rebound in domestic demand, putting GDP around 2.5 percent — a slowdown from 2018, but still above the economy’s potential rate of growth. And while some market observers, and the president, have been looking for some policy easing from the Federal Reserve, such as lower rates, the Fed’s statement suggests continued patience and no changes to the fed fund’s rate through the remainder of this year, and possibly a good portion of 2020.
  • In looking at future job growth, the U.S. Bureau of Labor Statistics Job Opening Labor Turnover Survey released earlier this month said there were 7.1 million job openings at the end of February. While the number of job openings declined from recent highs, the number is still above levels seen a year ago and since 2000 when the data history began. Job openings decreased from the month before, mostly in accommodation and food services (-103,000), real estate and rental and leasing (-72,000), and transportation, warehousing, and utilities (-66,000). The number of job openings fell in the Northeast, South, and Midwest regions.
  • Filling open positions remains a concern for companies. According to NABE’s Business Conditions Survey, 52 percent of respondents reported shortages of skilled labor at their firms—an increase from 45 percent a year ago.

 

Freshly updated map of what’s going up around town

developments_oct

Interested in what’s happening with new developments in San Francisco? Click the link below to view the interactive map…

http://www.parascopesf.com/development-map/

Source : Parascopesf.com