Bay Area Homebuyers Still Lead the Nation for Down-Payment Size

  • The average U.S. down payment was $20,000 in the third quarter, a 17-year high.
  • Buyers in the San Jose and San Francisco metropolitan areas again made the largest down payments in the country, a respective $247,000 and $170,000.
  • San Jose has the nation’s largest number of co-borrowers, with more than half of loans involving multiple mortgage holders.

The average U.S. down-payment size reached a new high in the third quarter, with Silicon Valley homebuyers putting down 12 times the national amount.

ATTOM Data Solutions’ latest U.S. Residential Property Loan Origination Report says that the median down payment for single-family homes and condominiums was $20,000 in the third quarter, the highest since the company began tracking that data 17 years ago. That represents 7.6 percent of the national median sales price of $263,000, the largest percentage recorded since 2013.

“Buying a home has become a full-contact sport in many markets across the country, and buyers with the beefiest down payments — not to mention all-cash buyers — are often able to muscle out those with scrawnier savings,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in a statement accompanying the report.

The median down payment was more than $50,000 in just one-dozen of the U.S. real estate markets included in the analysis, and as in the second quarter, that includes the Bay Area’s two largest cities.

Homebuyers in the San Jose metro area made average down payments of $247,000, again the most in the country. That translates to 25.5 percent of the region’s $970,000 median sales price. To amass that hefty sum, many Silicon Valley homebuyers are turning to family members for assistance. Also as in the second quarter, San Jose had the largest number of co-borrowers in the U.S., with 51.1 percent of single-family homes in the region involving multiple mortgage holders.

San Francisco buyers made the nation’s second-largest down payments — $170,000 — although that number was down $6,000 from the second quarter. That represents a 22.4 percent down payment on the median-priced $760,000 property.

Even Bay Area buyers who manage to save a six-figure down payment still have to compete with all-cash buyers. According to an August analysis by Pacific Union Chief Economist Selma Hepp, all-cash buyers are responsible for about 25 percent of home purchases in the Bay Area, though that number can range as high as 70 percent when broken down by county and price point.

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Wine Country Home Sales Show Strength in November


Executive Summary:

  • Following the Wine Country wildfires, home sales activity increased notably year over year in November, up by 13 percent in Sonoma County and by 24 percent in Marin County but down by 11 percent in Napa County.
  • Also, sales were markedly up from October with 16 percent, 17 percent, and 23 percent increases in Marin, Napa, and Sonoma counties respectively. Typically, sales activity slows between October and November.
  • While overall inventory continued to decline, October and November were characterized by higher levels of expired or withdrawn listings but also by an increase in new listings when compared with previous trends. Higher levels of expired or withdrawn listings dragged overall inventory down.
  • The months’ supply of inventory is now at its lowest level in two years in Sonoma and Marin counties.
  • Median prices grew by 16 percent in Sonoma County, 17 percent in Marin County, and 7 percent in Napa County compared with last November — a pattern that was consistent across the Bay Area.
  • While preliminary trends suggest that demand for homes has increased following the wildfires, overall tight market conditions in the Bay Area make it difficult to fully gauge the impact of the disaster.

It has been about two months since the raging Wine County wildfires, and assessing the impact on its housing markets is still only preliminary. As we noted in our Bay Area Real Estate and Economic Forecast to 2020, it will take couple of years to understand the full impact of the fires. Unfortunately, wildfires have become a reality of living in California.

Home sales activity picked up considerably in parts of the Wine County in November. Year-over-year sales rose by 13 percent in Sonoma County and 24 percent in Marin County, while dropping by 11 percent in Napa County. The annual increases in Marin and Sonoma counties were the largest among all Bay Area regions, while overall sales in the Bay Area declined by 2 percent. Napa County’s decline was a continuation of trends seen throughout 2017.

On the other hand, between October and November, sales were also up by a solid 23 percent in Sonoma County, 17 percent in Napa County, and 16 percent in Marin County. Typically, sales slow from October to November, with an average decline between 6 percent and 14 percent in those three counties over the last 10 years.

Figure 1 illustrates the somewhat atypical pattern of sales over the last couple of months. While Sonoma County saw some fluctuation during the summer, the three North Bay counties all posted monthly November increases, again inconsistent with previous years’ trends. Delving deeper into local Sonoma County markets showed that sales were up by 18 percent in Santa Rosa and 24 percent in Sonoma Valley year over year in November.

Figure 1: Monthly home sales by North Bay county

Source: Terradatum, Inc. from data provided by local MLSes, Dec. 6, 2017.

Nevertheless, while sales have picked up, the inventory of homes on the market has continued to fall, but with some important caveats. While overall inventory declined on an annual basis by 10 percent in Sonoma and Napa counties and by 9 percent in Marin County, there were 22 percent more new listings in Sonoma County, 20 percent more in Napa County, and 6 percent more in Marin County. Relatively higher levels of expired or withdrawn listings dragged overall inventory levels down. By comparison, San Mateo County had the largest year-over-year increase in new listings, up 27 percent, while the overall Bay Area had 7 percent more listings than last year. While it is not clear that the increase in new listings was purely driven by the wildfires, last year’s level of new listings in November in the North Bay was on par with 2015.

Declining inventory appears to be the result of an increase in expired or withdrawn listings, especially in Sonoma County, where they jumped by 37 percent, followed by a 4 percent increase Marin County and a 2 percent increase in Napa County. Those were the only three Bay Area counties that showed an increase in expired or withdrawn listings from last November. Overall, the Bay Area saw a 16 percent decline in such listings.

The increase in expired or withdrawn listings, especially in Sonoma County, is in large part due to the disorder that follows a natural disaster. Some of the homes could have been burned or damaged, some were offered for lease instead of sale, and some sellers may be waiting for the market to calm down. In examining expired or withdrawn listings in October and November that were later relisted, there is no clear trend that they were placed on the market for higher prices. On the contrary, out of the 33 homes that were relisted in November, eight were listed with adjusted prices, six were listed at lower prices, and two were listed at higher prices than they were prior to their expiration or withdrawal.

Figure 2 illustrates the monthly number of new listings and expired or withdrawn listings in Sonoma County, with November figures highlighted. The red lines illustrate the change in activity from last year. As expected, October shows a relatively higher number of expired or withdrawn listings than any other month, but the trend also continued in November.

Figure 2: Monthly expired and new listings in Sonoma County.

Source: Terradatum, Inc. from data provided by local MLSes, Dec. 6, 2017.

The increase in sales activity coupled with lower inventory led to a decline in the months’ supply of inventory in all three North Bay counties. Figure 3 suggests that Sonoma and Marin counties currently have only a one-month supply of homes on the market if the November rate of sales continues. Inventory in Napa County fell to a 2.6-month supply. All three counties, but particularly Sonoma and Marin, have notably less inventory on both a monthly and yearly basis.

Figure 3: Months’ supply of Inventory in Sonoma, Napa, and Marin counties.

Source: Terradatum, Inc. from data provided by local MLSes, Dec. 6, 2017.

Lastly, and probably most importantly for homebuyers and Wine Country residents, Figure 4 illustrates historical median price trends for single-family homes in the three counties. In November, median prices increased by 16 percent in Sonoma County, 17 percent in Marin County, and 7 percent in Napa County year over year. In Marin County, the current median price for single-family homes stood at $1.217 million. In Napa County, the median price was $657,000, while Sonoma County’s median price stood at $656,900. Among all Bay Area counties, only Napa and Contra Costa have not yet surpassed previous peak prices, though all have seen prices grow by about 100 percent-plus since the market bottomed out in 2010.

Taken together, it is still too early to fully understand the impacts of the wildfires. It takes time for people to adjust and make decisions on next steps. Clearly, many households are looking for homes to rent or buy, which is driving the immediate demand. As anticipated, already tight inventories have gotten tighter, and homes have gotten pricier. Nevertheless, with slim inventory levels across the whole region and home prices surging in most parts of the Bay Area in November, it is difficult to separate the impacts of the wildfires from overall market conditions. We will keep a close eye on changing trends in the coming months.

Figure 4: Median single-family home prices in Marin, Napa, and Sonoma counties

Source: California Association of Realtors

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

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Home Prices Rise in More Than 90 Percent of California Counties in October

  • The median sales price rose year over year in October in 47 of 51 California counties for which data is available.
  • For the second straight month, home prices rose by double-digit percentage points on an annual basis in the nine-county Bay Area — up 11.1 percent to $892,790.
  • San Francisco again overtook San Mateo County as the state’s most expensive housing market, with a median sales price of nearly $1.6 million.

An insufficient supply of homes to meet buyer demand pushed up annual home prices in most California real estate markets in October, with the nine-county Bay Area posting its second straight month of double-digit percent annual gains.

That’s according to the California Association of Realtors most recent home sales and price report, which puts the median price for a single-family home in the state at $546,430 in October, up 6.1 percent on an annual basis. Home prices rose year over year in 47 of the 51 counties for which CAR tracks data.

“While October’s year-to-year price gain was the lowest in five months, we’re still seeing solid price increases, especially in the San Francisco Bay Area. In fact, 20 of the tracked counties recorded strong double-digit, annual price gains,” CAR Senior Vice President and Chief Economist Leslie-Appleton-Young said in a statement accompanying the report.

As in September, the Bay Area’s price appreciation outpaced the state rate, rising by 11.1 percent from October 2016 to $892,790. Five Bay Area counties were among the 20 in California to post double-digit percent price gains: Santa Clara (18.3 percent), Contra Costa (14.8 percent), San Francisco (13.3 percent), San Mateo (12.8 percent), and Alameda (11.3 percent).

Like last October, San Francisco was the state’s most expensive county, with a median sales price of $1,594,000. California’s three other million-dollar-plus counties are located in the Bay Area: San Mateo ($1,522,500), Marin ($1,252,500), and Santa Clara ($1,242,500).

In what has become an all-too-familiar pattern, a lack of inventory is behind the statewide and regional price gains. California’s monthly supply of inventory dipped to 3.0 in October, down on both a monthly and regional basis. As they have every month so far in 2017, active listings declined by double-digit percentage points on an annual basis, falling by 11.5 percent.

The Bay Area continues to suffer from the state’s most pronounced housing shortage, with the months’ supply of inventory falling to 1.9. Santa Clara, Alameda, San Francisco, and San Mateo counties had California’s tightest supply conditions, all with less than a two-month supply of inventory.

The lack of properties on the market also caused the pace of sales to quicken substantially from a year ago, with the average California home finding a buyer in 21 days. Buyers in the Bay Area’s largest job centers needed to act even faster than that to close a sale, with homes in Santa Clara, San Mateo, Alameda, and San Francisco counties selling in an average of two weeks or less.

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Real Estate Roundup: Bay Area Tech Hubs Are Among the Nation’s Best for Income Growth

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

More good news for Bay Area workers and potential homeowners: incomes in three local cities rose by double-digit percentage points last year.

That’s according to an analysis by SmartAsset, which ranked the top 25 U.S. job markets for fastest-growing median annual incomes between 2015 and 2016. Oakland had the nation’s second largest income gains during that time period, up 15.7 percent to just over $68,000.

San Francisco ranks No. 6, with the median annual income up by 12.7 percent, while No. 8 San Jose saw incomes rise by 11.5 percent. San Francisco and San Jose were the only cities on the list where workers earned six-figure salaries in 2016, a respective $103,801 and $101,940.

The report comes on the heels of California’s latest favorable employment report, which said that the state added 52,000 new jobs in September. According to an analysis of the numbers by Pacific Union Chief Economist Selma Hepp, California grew jobs by 1.7 percent year over year, again outpacing the national growth rate of 1.2 percent.

California real estate remains the country’s least affordable, but San Francisco is no longer at the top of that list.

The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index says that the Los Angeles metropolitan area was the nation’s least-affordable housing market in the third quarter, with only 9.1 percent of homes affordable to households earning the median $64,300 annual income. San Francisco, which had been the least-affordable U.S. housing market for nearly five years, dropped to the No. 2 spot. Just more than 11 percent of San Francisco households could afford to purchase the median-priced home.

Other California metro areas rounded out the rankings of the nation’s least-affordable large real estate markets: Anaheim, San Jose, and Santa Rosa. The Golden State is also home to the country’s five least-affordable small housing markets, including Napa and San Rafael.

Bay Area homebuyers on a half-million dollar budget are finding that their options are increasingly limited, particularly in Silicon Valley.

Citing CoreLogic data, The Mercury News reports that for the first nine months of 2017, just 25.5 percent of single-family homes in the nine-county Bay Area sold for less than $500,000. In Santa Clara County, where the median sales price was $1,075,000 in September, that number was even smaller: 9.0 percent.

From 2002 through 2007, the number of sub-$500,000 Bay Area home sales steadily dropped before rising during the Great Recession. Since the recession’s end, Bay Area home sales priced under $500,000 have declined to even lower levels than they were earlier in the century.

A final note on current housing affordability: Although conditions are near a postrecession low, they are still more favorable than the long-term average — except in California and a handful of other coastal states.

According to a report from Black Knight Financial Technology Solutions, it required 21.2 percent of the national median income to purchase the median-priced home in September, compared with 24.2 percent in the 1990s and 26.2 percent in the first four years of this century. In a statement accompanying the report, company Executive Vice President – Data & Analytics Ben Graboske said that home price growth is canceling out savings provided by low mortgage rates, keeping housing affordability low across the country.

Forty-seven states had payment-to-income ratios lower than their averages between 1995 and 2003. California, Hawaii, Oregon, and Washington, D.C. were all less affordable than their long-term benchmarks in the third quarter.

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U.S. Homeownership Rate Inches Up

  • The U.S. homeownership rate ended the third quarter at 63.9 percent, still less than its historic norm of 65 percent.
  • The West has the nation’s lowest homeownership rate of 58.9 percent.
  • Homeownership rates range from 35.6 percent for millennials to 78.9 percent for older baby boomers.

The national homeownership rate improved slightly in the third quarter but remains below its long-term average due to inventory shortages.

A U.S. Census Bureau report puts the homeownership rate at 63.9 percent in the third quarter, up from 63.7 percent in the second quarter and 63.5 percent year over year. Homeownership is now at its highest level since the fourth quarter of 2014 but still below the 65 percent historic norm reported by The Wall Street Journal.

Although the U.S. homeownership rate has been slowly increasing since falling to a 50-year low of 62.9 percent in the second quarter of 2016, a lack of homes for sale is preventing activity from improving further.

“The American dream of homeownership remains elusive, as the third-quarter figure shows little change in the overall rate,” National Association of Realtors Chief Economist Lawrence Yun said. “The reason is simple. There is just not enough supply of homes to fully satisfy the desire to own. The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent.”

The Midwest has the nation’s largest homeownership rate at 69.1 percent, up more than one percentage point from the second quarter. The homeownership rate in the West was unchanged from the second quarter and remains the lowest in the U.S. at 58.9 percent.

The Census Bureau’s report again highlights the challenges that millennial homeowners face. Households under the age of 35 have the lowest homeownership rate of all generations — 35.6 percent. Homeownership levels gradually increase with age, reaching 78.9 percent for Americans age 65 and older.

As NAR reported in its recent 2017 Profile of Home Buyers and Sellers, first-time buyer activity has declined to 34 percent this year, also the by-product of limited inventory conditions and worsening affordability. Millennials and other first-time homebuyers are also burdened with student loans that average $29,000, which NAR estimates will delay homeownership by seven years.

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Real Estate Roundup: Bay Area Housing Bubble Unlikely to Burst, Economist Says

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

Bay Area home prices are already out of reach for many residents, and that appears unlikely to change barring an unforeseen economic catastrophe.

That’s according to National Association of Realtors’ Chief Economist Lawrence Yun, who spoke last week at the 27th Annual Convention and Expo of the Santa Clara County Association of Realtors. As The Mercury News reports, Yun told attendees that the Bay Area will probably not see a housing meltdown due to intense demand driven by plentiful jobs and exceptionally slim inventory conditions.

The San Francisco and San Jose metropolitan areas have created a combined 550,000 new jobs since 2012. The latest jobs report from the California Employment Development Department says that six local counties had the lowest unemployment rates in the state as of September: San Mateo (2.7 percent), Marin (2.9 percent), San Francisco (2.9 percent), Napa (3.2 percent), Sonoma (3.2 percent), and Santa Clara (3.3 percent).

Yun predicts that the robust California and Bay Area economies will likely continue to fuel demand and push home prices higher throughout the region. Over the past 20 years, home prices have quadrupled in the combined San Francisco, San Jose, and Los Angeles metropolitan areas.

One in five Bay Area workers earns more than $200,000, and while the tech industry plays a prominent role in those sizable paychecks, green jobs are also lining local employees’ pockets.

An analysis by SmartAsset ranks the nation’s best 25 metropolitan areas for environment-focused jobs on a scale of zero to 100 based on seven criteria, including the total number of green jobs and average salaries. Oakland ranks as the country’s fourth best city for green jobs, with an overall score of 90.97 and 2.2 percent of workers employed in those types of industries. San Francisco ties Las Vegas for 10th best city for green jobs, with a score of 74.58, while San Jose notches at 67.56 to rank 17th.

Green workers in those three cities earn the largest annual salaries in the country: San Francisco ($100,717), San Jose ($99,700), and Oakland ($94,393). But high housing costs likely offset those high earnings for some employees, with San Jose and San Francisco rranking as the two most expensive housing markets in SmartAsset’s study.

Sooner or later, Californians will have to deal with another significant earthquake, but perhaps by the time that happens, new houses in the state will be better able to withstand seismic activity thanks to a groundbreaking building material.

The University of British Columbia reports that it has designed a fiber-reinforced concrete called eco-friendly ductile cementitious composite, which is capable of withstanding a 9.1-magnitude earthquake like the one that struck Tohoku, Japan six years ago. Similar to steel, the material will see its maiden voyage this fall when it will be used to seismically retrofit a Vancouver-area elementary school.

The material not only has the potential to protect residents of earthquake zones, it’s also something that can protect the environment.

“By replacing nearly 70 percent of cement with flyash, an industrial byproduct, we can reduce the amount of cement used,” UBC Civil Engineering Professor Nemy Banthia said. “This is quite an urgent requirement as one ton of cement production releases almost a ton of carbon dioxide into the atmosphere, and the cement industry produces close to 7 percent of global greenhouse gas emissions.”


Despite a lack of skilled construction workers and the rising cost of building materials, remodeling activity remained healthy in the third quarter, with spend expected to increase again in 2018.

A blog post from the National Association of Home Builders says that its third-quarter Remodeling Market Index was in positive territory for the 18th consecutive quarter, meaning that more renovation firms report increased activity than those reporting a decline in business. In a statement accompanying the report, NAHB Remodelers Chairman Dan Bawden said that many remodeling businesses have backlogs, which he attributed in part to recent hurricanes in the Southeastern U.S.

According to a report from the Joint Center for Housing Studies of Harvard University, remodeling spend is expected to reach $333.6 billion by the third quarter of 2018, a number that has been steadily rising each quarter since 2014. That report points to a thriving U.S. economy, tight inventory conditions, and rising home equity as factors driving remodeling spend.

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