From Golden Gate Sotheby's Bay Area Market Report…
Strong job market keeps housing market moving
The housing market continued to thrive in May as more buyers and sellers entered the market. Job gains outside the Bay Area offset job losses inside the Bay Area, with the local economy adding more than 12,000 jobs so far this year. Positive year-over-year job growth kept the unemployment rate in the low 4% range and the labor market strong. The rising stock market also continued to buoy demand in the region. Housing inventory increased in May, but upward price pressures remain.
The inventory of available homes for sale has skyrocketed
With the spring buying season in full swing, more homes are hitting the market in the San Francisco Bay Area. The number of homes currently for sale increased to 6,400, up more than 10% from last month, highlighting growing optimism among sellers and the highest inventory level in more than four years. Despite the increase in inventory, current listings remain slightly lower than the historical average.
Listing numbers increased in all San Francisco Bay Area counties, but the largest increases in inventory were seen in Alameda, Marin and San Francisco counties.
More inventory means more sales
Buying activity has increased as the number of homes available for sale has increased, highlighting that inventory remains one of the main constraints on sales. More than 4,000 sales were recorded in May, 9% higher than April. Similar in some ways to the number of listings, sales activity was closer to a normal May, but still slightly lower than the historical average. More buyers entered the market as purchasing options increased, while some remain on the sidelines hoping for lower mortgage rates. Overall, sales activity increased in most San Francisco Bay Area counties, with the largest increases in Alameda, Marin, Santa Clara and San Mateo counties. Meanwhile, sales volume slowed slightly in Napa and Santa Cruz counties, where vacation and second home sales account for the majority of sales.
Highest price range shows great strength
Higher priced home sales continue to be a major driver of overall sales activity in the San Francisco Bay Area. Nearly 800 homes sold priced above $2.5 million, up 20% from April. Highlighting increased demand in this price range, this segment now accounts for a larger share of sales than at any point in the past seven years. Most of the sales in this price range took place in upscale neighborhoods in San Mateo and Santa Clara Counties, but there was also an increase in Alameda and Contra Costa Counties.
Rising demand leads to increased competition
Although more homes are on the market, strong demand is stimulating buyer competition. Nearly two-thirds of homes sold for above asking price in May, the highest percentage in two years. Alameda and San Francisco counties continued to lead the San Francisco Bay Area, with nearly 80% of homes sold for above asking price. Of homes that sold above list price in Alameda and San Francisco counties, sellers received an average premium of more than 14%. Not only did more homes sell for higher prices in the San Francisco Bay Area, they also sold faster. San Francisco Bay Area homes sold in May stayed on the market for an average of about three weeks. Compared to last year, days on market improved across all price ranges. Homes in Santa Clara and San Mateo counties sold at the fastest pace, staying on the market for an average of about two weeks. North Bay homes stayed on the market longer than the rest of the region, averaging more than two months in Napa and 1.5 months in Sonoma. But in both cases, the time on market was shorter than at the start of the year.
Future outlook
The San Francisco Bay Area housing market continued to expand even as prices reached record levels in many areas. Potential buyers appear to be perfectly attuned to the current mortgage rate environment, realizing that they have the opportunity to buy now and refinance in the future if interest rates fall. Behind the strengthening housing market is a relatively strong economy, despite reduced employee numbers in some industries. Overall, rising incomes and good economic fundamentals will continue to support a growing demand for quality housing. It would not be surprising to see sales, active listings, and prices all increase as we head into the summer.
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