The Bay Area spring home buying season exploded in April, with buoyant sales and prices exceeding $ 1 million for the second straight month.
The average price for an existing single-family home in the nine-county region reached $ 1.15 million in April, driven by scarce supply and strong demand for suburban space. The price marks a 12% increase from March, which, according to CoreLogic and DQNews data, signals a favorable trend for home sellers but more costly bidding wars for buyers.
Still, economists and agents say the frothy market isn’t a bubble – just a reflection of the Bay Area’s economic strength, demand for homebuyers, and too few homes available.
CoreLogic’s deputy chief economist Selma Hepp said pandemic demand pent-up is driving prices. “They are traditional buyers, not speculators,” said Hepp. “When you think of ‘bubble’ you think that there is speculation going on. But it’s not speculation. “
Analysis of FHA loans by housing researchers at the American Enterprise Institute of Bay Area Properties – particularly in the San Francisco, Santa Clara, and San Mateo counties – supports Hepp’s point of view. It found the Bay Area had the lowest loan default rates in the US last April.
The study suggests that homeowners on government-sponsored loans are making mortgage payments in the Bay Area, in contrast to the rising loan defaults that led to the 2007 property crash.
Prices are skyrocketing in once relatively affordable East Bay communities as Silicon Valley tech geeks are offering $ 100,000 above list prices to shop in peninsular cities. Low interest rates, hovering around 3% on a standard mortgage, have allowed buyers to expand their budgets.
The rise in property prices in the Bay Area was led by Contra Costa County, which rose nearly 25% year over year to $ 972,000, Alameda County, which rose 17% to $ 1.18 million, and Santa Clara County, which grew 11.5% to $ 1.52 million, according to CoreLogic data. The median year-over-year price rose 8.5% to $ 1.75 million in San Mateo County and 2.9% to $ 1.79 million in San Francisco.
Median prices rose 28% from April 2020 – a low water mark for real estate as few sales closed during the initial lockdown on COVID-19 restrictions.
Sales of all homes, including condos and new and existing homes, rose 15% from March through April. The number of transactions more than doubled compared to April.
Hepp said that part of the intense demand is driven by the fear of buyers: “I can’t get in if I don’t get in now.”
Brokers and real estate professionals say the market has accelerated to a peak last seen in 2018. Coveted houses attract several offers the day they go on the market.
In the counties of Alameda and Contra Costa, the average number of market days between January and May fell from 25 to 13 days. “The price increases in the East Bay are staggering,” said David Stark of the Bay East Realtors Association.
MSLlistings’ Michelle Ronco said the home inventory had grown but not enough to keep up with demand. In Cupertino and Saratoga, for example, houses are listed and sold the same day. “Whatever comes comes immediately,” said Ronco. “It’s just basic supply and demand.”
The common trend in Silicon Valley of selling homes at a premium above list prices has spread to Santa Cruz and Monterey counties, as well as Hollister, she said. These regions have all achieved record home prices in the past few months, according to data from MSLlistings.
Cupertino agent Ramesh Rao said professional couples continue to offer single-family homes near tech offices on the peninsula. He warns customers that they may need to bring more cash to close a deal as prices have sometimes gone up $ 250,000 or more above lists.
One of Rao’s clients, a tech couple in their thirties, started looking for a single-family home with a beautiful garden in San Jose with an initial budget of $ 1.3 million. They were told to expect their finances to be strained – and eventually won a bidding war with a $ 1.75 million bid for a spacious four-bedroom room with a collection of fruit trees in the backyard.
Rao said demand for space remains strong even after pandemic restrictions are relaxed. “Which buyer has ever said, ‘I want a small house?’ “They always want a bigger house,” he said.
The market was a challenge for many buyers, said Pleasanton agent Tina Hand. She had to help clients adapt to the fast pace and inflation in the East Bay. “A list price is just a number. The estimate is really just a number, ”Hand advises new buyers. “What are you really willing to pay?”