What part of the Bay Area home market is driving higher prices?
How long will mortgage interest rates stay at historic lows?
How is the strength of Bay Area employment impacting real estate?
The nine Bay Area counties making up the greater San Francisco Bay sold almost 8,000 homes of all types in October according to DataQuick, the real estate information service. This continues the 2012 trend that began in the first quarter. In addition, Bay Area home sales have increased 16 months in a row. The middle to high end price points are driving sales, which has now been the trend for the past twelve months. In the East Bay – Alameda and Contra Costa Counties, alone, sales above $500,000 were up 43% year over year. And, there were 50 homes sold in Santa Clara County last month for $2 million or more.
The median sales price of a single family in the nine-county Bay Area was $440,000, up about 16 percent from a year ago… all good news. The Seller’s market is back and home sellers need to focus on strategies that allows for the highest possible price in the shortest period of time. Remember, where you have strong job markets a healthy real estate market will follow. The Bay Area job markets are leading all of California.
Still, before we all jump to conclusions about the sustainability of the current Bay Area housing rally, we need to keep an eye on six key factors in order for home buyers to make good decisions.
- The Bay Area jobs market continues to outperform any other region in California – vibrant jobs market = healthy real estate market.
- The lowest mortgage rates in 40+ years is getting people off the sidelines and taking the steps to get back into home ownership. Current mortgage interest rates are either side of 3.4% today.
- The rental market rates have jumped so much in the past two years that rents are now higher than mortgage payments if a potential buyer has the needed down payment.
- Inventory of homes for sale is the lowest it has been in 20 years. So, the current ‘buyer pool’ is greater than the number of homes to consider which may be contributing to driving up home prices.
- Potential Sellers are still not able to sell because they do not have enough equity in their current home to make their next home purchase, which would require at least a 20% down payment.
- Sales of distressed homes have declined dramatically in the Bay Area. In October of 2011 they made up 63% of the homes sold. Today, it represented only 33% of homes sold in the Bay Area during October 2012.
So, what can we conclude from today’s home sales numbers? A) The real estate bottom of the past five years is far behind us in the Bay Area. B) Consumers are not afraid of home purchases today given the strong employment base and the rise in home prices that we are all enjoying. C) Mortgage interest rates will remain low right into 2014 if the Feds keep their promises. D) As home values continue to rise there will be more homes on the market from the Sellers who have been waiting to make quality of life moves. E) As long as the Bay Area job markets stay healthy there is no end in sight to a healthy Bay Area real estate market.
Contact us today if you would like FREE price evaluation of your home, or if you will be purchasing a home in the next six months. We are standing ready to be of service. Until next time… Jim Walberg.