The latest on the real estate market in the Bay Area

Home sales, economy and job market show signs of improvement

2012 has certainly started off on the right foot. Home sales in the Bay Area were up in January. Several key economic reports showed surprising gains. And even the long beleaguered job market turned in positive numbers in the initial weeks of the new year.

Bay Area home sales in January jumped to their highest level for the month in five full years, according to DataQuick, the La Jolla-based real estate research firm. A total of 5,479 new and resale houses and condos sold in the nine-county region during the month, up 10.3 percent from January 2011. This marked the seventh straight month of year-over-year sales gains.

DataQuick attributed the improvement to lower home prices, record-low mortgage interest rates, a surge in investor purchases and an improving economy.

While the jump in sales is encouraging, the firm cautioned that activity was still tilted heavily toward distressed sales in many Bay Area markets. As a result, the median sale price dipped 2.8 percent from the previous month and 3.6 percent from a year ago.

Meanwhile, the U.S. economy finally appears to be gaining some traction. The government reported that the GDP grew at a 2.8 percent annual rate in the final quarter of last year, up sharply from the third quarter's 1.8 percent rate. And there are indications that the latest GDP figure could actually be revised higher due to wholesale inventories rising in December.

Even more encouraging for the housing market, the labor market is steadily improving. Initial weekly unemployment claims fell 15,000 to 358,000 in a new report by the Labor Department. And the four-week average fell to its lowest level since April 2008, the period before the financial crisis. Finally, the unemployment rate has dropped to a three-year low of 8.3 percent.

Most analysts agree that in order to have a self-sustaining recovery in the housing market we first must have a significant turnaround in the job market. There are indications with improvements in recent months that could be happening at long last.

While all of these economic and employment reports give us reason for optimism, we can’t ignore the fact that the housing market still faces some challenges before returning to normalcy.

Sales have rallied in the new year, but we’d like to see the mix of homes selling move more towards the center of the market and become less reliant on distressed sales. That’s happening in many communities, but far from all.

Additionally, while buyers have gotten the message that things are turning around and they’re jumping back into the market with both feet, the same can’t be said of sellers. In many communities there still is a drastic shortage of homes for sale, which is frustrating buyers and leading to multiple offers in many cases.

Things are out of balance right now and that needs to change for us to have a healthy market. I suspect it will as the spring selling season comes along and homeowners realize that the market and economy have both turned the corner.

Buyers are out there and willing to pay fair prices for attractive, well-priced and well-maintained properties. Now we just need sellers to join the party.


Below is a market update for our area.

Silicon Valley – Lots of competition for well-priced homes in the popular areas, our Cupertino office manager says. The high end market is picking up, especially under $2 million. In Los Altos, more buyers are getting ready to move, trying to beat the Facebook crowd. Multiple offers are happening in half of the sales. Creating inventory continues to be the biggest challenge in Los Gatos. The same story is echoed by our Palo Alto office manager, who says inventory is almost as low as in 2005 – with extreme demand. Lots of activity at open houses, reports our San Jose Almaden manager. Buyers are competing for homes under 500K. Sellers who feel the market has improved and now they can ask more don’t sell. However, buyers are willing to pay top dollar for “turn key remodeling.” In Saratoga, even though we’re experiencing multiple offers below the $2.5 million level, the inventory remains very low. Our manager is encouraging agents to tell their sellers that this is the time to place their homes on the market. We’re experiencing many multiple offer situations. Anything below $3,000,000, if priced correctly, seems to be selling fast. Buyer’s agents seem to be frustrated as there are 5 to 15 offers on each property.

That’s it for now. Have a great week but please let me know if you or anyone you know could use my real estate services.
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