Bay Area home prices leap amid signs market calming

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1 Real Estate Bay Area home prices leap amid signs market calming More sellers jumping in to list house, easing tight inventory Rohan Smith, The Chronicle Ryan Huntsberger (right) and another staging designer with Scout Home Staging ready a home for sale in Berkeley. By Carolyn Said July 19, 2013 Bay Area home prices soared in June, with the median price hitting $555,000 - a record one-third 1/6

2 higher than a year earlier - even as signs emerged that the fevered market is calming somewhat. The median's 33.1 percent surge from a year earlier was an all-time record gain, while $555,000 represented the highest median since December 2007, according to a report from San Diego's DataQuick released Thursday Continued tight inventory meant fewer homes changed hands in the nine-county region than a year earlier. A total of 7,897 new and resale houses and condos were sold in June, 9.4 percent fewer than June 2012, DataQuick said. The sales volume was also down 7.5 percent from the prior month - even though sales usually bump up 4 percent between May and June. Three key trends propel the continued run-up in home prices, said Andrew LePage, an analyst with DataQuick: "super low (interest) rates, super low inventory and record levels of investor purchases." All those trends are now in flux, though, meaning the frenzied market may start to take a breather. More sellers, inspired by stories of big paydays, are listing their homes for sale, easing the inventory situation. "I certainly think the word is out that this is a good time to sell - as good as it gets," said Scott Ward, an agent with Lawton Associates in the East Bay. "It seems like there's an OK amount of inventory now." He's readying a two-bedroom Craftsman in Berkeley's San Pablo Park neighborhood to hit the market at $520,000. The owner purchased it for his daughter to attend school in Berkeley, kept it as an investment property and now sees the time as ripe to sell. Bidding wars ease 2/6

3 7/19/13 Bay Area home prices leap amid signs market calming - San Francisco Chronicle Rising inventory has already reined in the bidding wars. Rohan Smith, The Chronicle Shane Thygeson with Scout Home Staging enters a house that he is helping stage in Berkeley. "I have definitely noticed the inventory increases," said Mia Simon, an agent with Redfin in Silicon Valley. "You can feel it in the sense that there are four to six offers where there used to be 20. But that's not to say competition has cooled. Bidding war winners are still needing to waive contingencies and escalate their offer prices." In San Francisco, 2,238 new for-sale homes hit the market in the second quarter - slightly up from 2,065 in the same quarter last year, said Patrick Carlisle, chief market analyst for Paragon Real Estate Group. But because eager buyers snap up new homes quickly and because the market is starting at a very low base of inventory, "on any given day, listings are still down," he said. "Because things are flying out the door almost as soon as they hit the market, new listings don't increase the inventory because they disappear too quickly." Likewise in the East Bay, Aman Daro, director of marketing and business development for Red Oak 3/6

4 Realty, said inventory is rising. At the beginning of the year, it was down 70 percent from a year earlier. By the end of March it was down 54 percent, and by the end of June it was down 11 percent, he said. Supplies are still tight but have gone from 0.4 months' worth of inventory in late 2012 to 0.9 months' in the second quarter, Daro said. Interest rates rise Meanwhile, interest rates are rising. On Thursday, Freddie Mac reported the average 30-year fixed mortgage to be 4.37 percent - more than a full percentage point higher than the 3.35 percent rate in early May. DataQuick's report on sales that closed escrow in June represents purchase decisions commenced in May and late April, before rates started rising so quickly, so their impact is not yet captured. 4/6

5 Simon from Redfin sees increased interest rates as a factor spurring some buyers to act quickly. "Now that rising interest rates have become a reality, many home buyers are taking this slightly slower moment as an opportunity to take a step back and reassess their strategies to get a home under contract before rates increase much higher," she said. But Paragon's Carlisle pointed out that historically speaking, rates are still a bargain. "Anytime prior to 2011, people would have been dancing conga lines in the street to celebrate interest rates as low as they are today," he said. Fewer distressed sales The median price does not reflect the average - rather, it marks the midway mark, with half the homes selling for more and half selling for less. DataQuick said the Bay Area's median rise was about three-quarters due to rising home values, while the rest stemmed from a changing market mix as more high-end homes and fewer low-cost homes changed hands. Distressed property sales continue to decline. Foreclosures were just 6 percent of resales in June, below their 17-year average of 10 percent. Short sales - properties sold for less than is owed on the mortgage - were 12.1 percent of resales, compared to 22.7 percent a year ago. Absentee buyers accounted for 23.7 percent of June sales, while all-cash buyers were 25.6 percent of the market. Carolyn Said is a San Francisco Chronicle staff writer. csaid@sfchronicle.com 5/6