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Bay Area Home Prices at Pre-Recession Levels….and Climbing
As I’ve said in previous columns, the 2014 Bay Area real estate market is thriving – prices are rising and buyer demand is intense. This upward trend is being reported by a number of major real estate news sources – for example, last week Zillow (a leading real estate online marketplace) released a report showing that home prices in many Bay Area cities have hit pre-recession levels. According to Zillow’s data, 49 Bay Area cities have already reached pre-recession prices or will very soon, and prices are expected to continue to climb in 2014.
After the roller coaster ride of the past 7-8 years, we can’t take for granted (as many of us once did) that homes will always gain value in the Bay Area … at least not in the short-term. But a number of factors are creating a very strong seller’s market right now. Today I’m taking a look at why this is happening.
Local economy and interest rates
Of course, the biggest drivers are related to rates and the Bay Area economy – it’s continuing to improve, and relative to most of the country, our economy is not just strong, it’s really flourishing. Thanks to tech and biotech and all the wealth pouring through the Valley, the Bay Area has a plethora of folks with money to spend on swanky pads. Moreover, although interest rates are higher than the low levels they hit last summer, they’re still pretty fantastic and low for now – according to financing experts rates are likely to continue rising over the next couple of years. It’s a great time to buy … except …
Many (many) people house hunting
There is a major shortage of homes on the market – and a lot of people looking. Trends I’ve seen in recent months include: buyers relocating to the Bay Area, buyers frustrated by the expense of living in San Francisco and moving out to the East Bay (a major exodus reported by many news sources), buyers who weren’t able to take advantage of last year’s rates but can now, and buyers who’ve been looking for months, but are getting shut out of the market because there are too few houses available.
There’s a kind of bottled up demand that seems to be exploding right now. Homes still need to be prepared, priced and marketed correctly, but many well-presented homes are receiving multiple offers and selling in 1-2 weeks. And for every home that sells under those circumstances –quickly and with multiple offers – that means you’ve got several families who didn’t win that bid and are still looking in that neighborhood for a home with similar specs. As buyers lose out on bids, they may feel “desperate” to find a place – and bid more intensely the next time … contributing to the seller’s market we’re in today.
So why are there so few houses on the market at the moment?
Homeowners may not be as motivated to sell right now
Some people who may have been teetering on the edge of having to sell, don’t need to anymore … and as their asset (their home) keeps climbing in value, they may be even less inclined to sell no matter what their circumstances are. Properties that may have been “underwater” for a few years are no longer in that predicament. Many folks who needed to refi and were paying a too high mortgage for years, but hung on to their property have now been able to refinance at more affordable rates. Homeowners are feeling better about their mortgages, and better about job stability … One of the ways I see this is through the busyness of all the home improvement contractors I know! More people are staying put and improving the home they own.
Families want to move up or downsize, but are afraid of becoming homeless
With today’s hot and competitive market, many sellers are worried that if they sell their home they may not quickly find the right home to purchase … so they are dragging their feet, trying to figure out the best course of action. There are also a lot of families who are taking the leap and working with good realtors to negotiate “rent-back time” in their current home, so they can find and purchase their next home.
So how can homebuyers navigate this moment in the market? Buyers who have struggled with falling in love with a home, making an offer and then losing … need to discuss with their agent how to write a competitive offer or change things up a bit. Because we’re experiencing a strong upward trend in home prices in 2014, every month that goes by waiting could be costing buyers thousands of dollars in a higher purchase price and interest rates.
It’s going to be an interesting summer selling season in the East Bay. I anticipate that we’ll have a much better run up on housing inventory over the next 6 to 8 weeks, and that will clear out pretty quickly if the homes are priced right and prepared well. I suspect that in coming months prices will trend higher and interest rates will increase slightly. Buyers and sellers who wish to take advantage of today’s prices and interest rates need to have a little more patience, persistence and good counsel if they want to make their real estate sale or purchase happen now, vs waiting to see what happens later in 2014.
After all – for those of you thinking of buying or selling at some point this year, wouldn’t you rather spend your summer enjoying a new home instead of hanging out with a realtor??
Until next time … Nancy
Nancy Bennett, Realtor, Keller Williams East Bay CalBRE 01399870
Nancy Bennett has over 20 years of sales and marketing experience, with 10 years selling real estate in the East Bay. She’s an award-winning, realtor in Contra Costa County, the #1 Realtor in The Crossings neighborhood, and heads up The Bennett Team – the leading real estate team at Keller Williams East Bay.
She is also a member of the National Association of Realtors, the California Association of Realtors, the Contra Costa Association of Realtors, the Fortune 400 Masterminds, and Contra Costa Realtors in Motion. She serves on the Agent Leadership Council, as well as being a faculty member and mentor to new agents at her office.
Nancy is a licensed foster parent and a volunteer with local organizations such as Meals on Wheels and Youth Homes in Walnut Creek. For more information, see www.BennettBetter.com orNancy can be reached at: Nancy@BennettBetter.com.