Forget crypto-currency, AI or blockchain companies in your investment portfolio.
Homes are still the hottest commodity in the Bay Area.
Median home prices in the region continued an unprecedented six-year run, with resale homes gaining double-digit value in the last year. Prices in the nine-county region bolted up 14 percent from March 2017, led by soaring deals in Santa Clara and San Mateo counties, according to a report released Tuesday by real estate data firm CoreLogic.
The median resale price for a Bay Area home last month was a record $850,000.
“It’s a feeding frenzy fueled by a factor of fear,” said Kevin Cole, Alain Pinel broker and president of the Santa Clara County Association of Realtors. Buyers are motivated after bidding high and still failing to close a deal, he said.
“They’re not just disappointed once,” Cole said. “They’re disappointed two, three, four or five times.”
March marked the eighth straight month the region has seen double-digit growth in prices. Median prices have now risen for 72 straight months, a run that has bested the market swells of the dot-com era.
Year-over-year gains in San Mateo and Santa Clara counties hit 29 percent, while Alameda rose 11.7 percent, according to CoreLogic number. Sales for the median-priced home rose nearly 11 percent in Contra Costa County and 12 percent in San Francisco.
Low unemployment and a strong economy, coupled with a short housing supply, have boosted the regional market to the most expensive in the nation. Prices were driven by buyers active in the mid- and high-end market, Core Logic analyst Andrew LePage said.
“There’s no getting around the fact that the Bay Area has seen significant price appreciation,” said LePage. “It’s just getting more expensive.”
The typical U.S. home gained 6.7 percent in value between February 2017 and 2018, according to CoreLogic’s home price index. During the same period, Santa Clara County home values appreciated 19 percent, followed closely by rising values in San Mateo County (15 percent), Alameda County (11.5 percent) and Contra Costa (8.8 percent).
Tim Ambrose, a broker with Berkshire Hathaway in Castro Valley, said buyers in the East Bay were struggling despite making strong offers well above the listed price. “Inventory is down,” he said. “That’s why prices are going up.”
Santa Clara County has about 975 residential properties listed for sale, less than half of the typical inventory for this time of year, said Bill Moody, a broker with Referral Realty in Cupertino. Homes are selling within two weeks, and condominiums and townhomes are closing even faster, according to local statistics.
“Whatever is going on, the market is selling quickly,” Moody said.
Overall sales remained flat, according to CoreLogic. Only Santa Clara and Sonoma counties recorded more home purchases in March than in the same period the year before.
The numbers show big gains for property owners, and big challenges for prospective homeowners. The median price for a home in San Mateo County last month was $1.56 million, and $1.36 million in Santa Clara County. Prices in Alameda County pushed closer to seven figures, with the median sale price checking in at $860,000. Contra Costa County saw median prices hit $610,000.
Mark Wong, a broker with Alain Pinel on the Peninsula, said homes in school districts with good reputations continue to be desirable. He noted activity picking up in entry-level homes, still over $1 million, in Mountain View, Sunnyvale and Cupertino.
He’s also seeing more preemptive offers in popular neighborhoods.
Wong said one of his clients made several unsuccessful attempts to buy into Mountain View, despite offering more than sellers’ asking prices. The prospective buyer recently put in a bid for more than $500,000 over a $1.3 million asking price for a fixer upper — even before the open house.
The seller accepted the early offer, Wong said. “You have to play the game,” he said.
The data shows that buyers are still stretching to become homeowners. Jumbo mortgages — loans generally over $680,000 in most of the Bay Area — financed 4 in 10 sales, up from previous months.
Higher prices have even led investors to cool on the area. Absentee buyers purchased about 19 percent of homes, down from a peak of 28 percent in February 2013, according to CoreLogic data.
Local agents expect the market to remain tight into the peak summer house-hunting season. The region has added far fewer homes than jobs over the past several years.
Several brokers said they advise buyers to remain patient during a sometimes frustrating search.
“What rules the day is supply and demand,” Cole said. “Expect to settle for what your money will be able to purchase.”
