- Home sales activity continued with annual declines posting a 10
percent year-over-year (YOY) decline in the first quarter.
- However, San Mateo and Santa Clara see an increase in sales of
homes priced below $1 million for the first time in 26 months, helped by the
increases in inventories from previous months.
- Sales priced over $2 million have slowed notably compared to
2018, down 25 percent YOY in Q1, but still above 2017 levels.
- For-sale inventories are up 14 percent overall with all regions
having more inventory than last year.
- However, after a short period of improved inventories, sellers
in San Francisco took homes off the market in recent months waiting for IPO
buyers – bringing inventories below last year’s levels in all price ranges.
- Median home prices were down 3 percent YOY in March, mostly due
to an increase of lower-priced sales compared to last year.
- Santa Clara and Sonoma post relatively larger YOY declines in home
prices, 12 percent and 8 percent respectively. However, 2018 spring prices in
the two regions grew at unsustainable rates.
- Bay Area housing markets have all the characteristics of a
potentially robust home-buying season — more inventories, lower mortgage
interest rates than last spring, motivated buyers and sellers, and possibly
more IPOs in the pipeline.
Following a doldrum first quarter for housing market
activity in the Bay Area, potential impacts around Lyft and Uber’s already
filed IPOs and anticipated IPOs have started driving buyer and seller behaviors.
A look back at the first quarter activity suggests buyer
hesitation, which started in second half of 2018 and continued into early
months of 2019 bringing home sales down 10 percent below last year’s levels. The
largest monthly decline, however, occurred in March when sales dropped 14
percent, compared to 7 percent and 6 percent respectively in January and
February. In most all Bay Area regions, except Alameda, first quarter 2019 was
the slowest in last five years. The slump in sales activity resulted from many
factors, almost too many to count, with weather bringing the last punch.
Nevertheless, homes priced $2 million and higher experienced
relatively larger year-over-year declines in sales activity, while homes priced
below $1 million finally reversed the double-digit declines that characterized
2018, declining at the slowest rate compared to higher-priced sales.
Improvement in sales of homes priced below $1 million was helped by
year-over-year increases in sales in San Mateo and Santa Clara – the first
annual increase after at least 26 months of declines which sometimes reached as
much as 40 to 60 percent. Table 1 summarizes changes in the number of sales by
region compared to last year’s first quarter.
While higher-priced sales did experience a relatively larger drop off in activity compared to 2018, higher-priced sales still trend above 2017 levels and the years prior. Last year saw a surge in sales of homes priced above $2 million. Figure 1 illustrates monthly sales activity by price range, the black line highlighting sales priced at $2 million and above. Note that sales activity nearly doubled between the summer of 2017 and 2018, peaking in May 2018. As Table 1 suggests, most all regions except Alameda saw fewer sales above $2 million than last year. Count-wise, declines were mostly driven by Santa Clara and San Mateo.
San Mateo and Santa Clara did see a jump in sales of homes
priced below $1 million, both up 8 percent, which may suggest buyers are
responding to anticipated IPO impacts. However, these were also the areas with a
robust buildup in for-sale inventory of homes priced below $1 million starting
in fall of last year. Thus, availability of the inventory may have pulled in
buyers who have been desperately waiting for more affordably priced homes.
Figure 1: Number of monthly home sales in the Bay Area, by price range
Sellers also seem to be also responding to Lyft and Uber and
potentially other IPO filings. For example, while Santa Clara averaged 30
percent more inventory in the first quarter, San Mateo sellers tested out the
market between November and January, driving inventory up an average of 21
percent above last year, then driving inventory down 10 percent again in March.
San Francisco sellers responded the same way. After the
first annual increases in 25 months between October and December, inventory
declined again by 32 percent year-over-year in February and March – the largest
declines across the region seen among homes priced below $1 million. However,
San Francisco sellers of all price ranges decided to hold off on listing their
homes, whereas there were more sellers of higher-priced homes across all other
Bay Area regions.
To illustrate San Francisco sellers’ response, Figure 2 tracks monthly year-over-year changes in for-sale home inventory in San Francisco overall, San Francisco inventory below $1 million, and overall Bay Area without San Francisco. The black line is highlighting the relative drop in San Francisco inventories below $1 million in the last two months, after a short three-month increase during the winter months.
Figure 2: Year-over-year change in for-sale inventory
Table 2 summarizes March’s year-over-year change in
inventories across all Bay Area communities. Fortunately for Bay Area home
buyers, inventory options have generally improved compared to last year. In
addition, inventory of homes priced below $1 million has improved, driven by
jumps in Alameda and Santa Clara.
While anticipations are running high on how Lyft and Uber
IPOs may affect Bay Area housing markets, particularly San Francisco, median
home prices remain below last spring’s high. Note that beginning in fall 2017,
median home price growth started accelerating at double digit rates, reaching
as much as 18 percent year-over-year growth in March. Median prices peaked in
May 2018. Price growth has moderated since then, and more recently fell below
last year’s levels. However, as noted above, the share of higher-priced sales
also declined since last summer peaks, thus more lower-priced sales are
affecting the mix of sales and lower year-over-year rates. Figure 3 illustrates
median price trend in San Francisco and the Bay Area overall. While a seasonal
increase in home prices from January lows is evident across the Bay Area
region, San Francisco and Marin (not in chart) experienced a relatively higher
jump than in other areas, with San Francisco jumping 16 percent, Marin 21
percent, and the overall Bay Area 12 percent. Still, none of these suggest any
trends as seasonal jumps of that magnitude have been historically consistent.
Table 3 summarizes March median home prices, year-over-year
change, and first quarter change. Most notable declines remain in Santa Clara
and Sonoma, both of which saw a rather significant run up in prices in early
2018. In both regions, prices are back to where they were before the 2018 run
Figure 3: Median Home Prices
In summary, it will be an interesting year ahead for Bay
Area housing markets. While much of Lyft and Uber IPO monies will be
constrained by employees’ lock-up periods in the coming months, housing markets
certainly have all the characteristics of a potentially robust home-buying
season — more inventories, lower mortgage interest rates than last spring,
motivated buyers and sellers, and more IPOs in the pipeline. Stay tuned!