Bay Area home prices hit another record high in April.
Bay Area home prices set another record for the second straight month in April, as the median climbed to $850,000. That’s up 2.4 percent from March and 13.3 percent from April of last year, according to a CoreLogic report released Thursday.
It was the ninth consecutive month of double-digit year-over-year increases. Over the last six months, those gains have averaged 13.2 percent, compared to a year-over-year gain of 6.5 percent during the same period a year ago.
The median price is the point at which half of homes sold for more and half for less. Part of the increase in the Bay Area median is a “subtle shift in the market mix, where a higher share of sales are occurring in the mid- to high-priced areas,” CoreLogic analyst Andrew LePage said in a press release. “That’s in part because of the especially thin inventory of homes for sale in the more affordable areas, frustrating many first-time buyers.”
This year’s price rise is especially remarkable when you consider that mortgage rates have risen almost three-quarters of a point over the past year. The average rate on a 30-year fixed-rate mortgage hit 4.66 percent this week, its highest since the week of May 5, 2011, Freddie Mac said Thursday. The current rate is up from 4.61 percent last week an 3.95 percent a year ago.
Rising rates may be pinching some buyers, said Mark Palermo, an agent with Keller Williams. He sold a condo in Redwood Shores complex in March for $1,335,000. “In April, just when interest rates climbed a bit, the exact floor plan in the same complex with better water views hit the market from another agent. The result was one offer and the price was $80,000 below my condo,” he said in an email. However, the lower-priced condo was not as updated as the one he sold. “In 2017, buyers were not as discerning. They were outbidding one another despite the condition of the home.”
There is “no question that rising rates will price out people who were just on the bubble to qualify for a mortgage,” said Garrett Frakes, a managing partner with Polaris Pacific, which markets newly built condos.
But rising rates could also be contributing to the upward spiral in home prices, by choking off some supply.
“What you have here is sellers simply not putting their homes on the market. We are seeing this in single family homes and condos,” Frakes said.
There are several reasons for this. Many people are reluctant to sell because they’re afraid they won’t be able to buy a replacement home in the Bay Area.
And some long-time homeowners have an aversion to paying capital gains tax on highly appreciated homes, or giving up their low property tax base.
Rising rates are keeping some people in their homes. “If you refinanced three or four years ago at 3.75 percent, you don’t necessarily want to go out and buy a new home and pay 4.75 percent,” Frakes said.
Instead of moving, more people are choosing to renovate their existing home. “When you have low inventory, it tends to support itself,” he added.
The CoreLogic report includes all newly built and existing single-family homes and condos in the nine-county Bay Area. The data comes from recorder’s offices and includes homes that were not listed on a Multiple Listing Service before they were sold. These off-MLS sales account for at least a fifth of home sales in some areas.
It showed that 7,497 homes homes and condos sold in April, which was up 4.5 percent from March and up 8.2 percent year over year. Sales typically climb between March and April, by 5 percent on average over the long run. The 8.2 percent year-over-year climb is encouraging, but the number sold was still 15.8 percent below the long-run (since 1988) average for April.
For the fifth consecutive month, Santa Clara County had the biggest year-over-year price gain — 23.3 percent. Prices there, however, fell 5.8 percent from March, the Bay Area’s biggest month-to-month drop. That could reflect some buyer exhaustion in a region where high-paying tech jobs are plentiful tear-downs go for millions of dollars.
Coldwell Banker Realtor Cheryl Rivera Smith has two identical side-by-side tear-downs in Mountain View on the market. The homes are about 1,000 square feet each and in such bad shape buyers aren’t allowed inside. “But they’re within walking distance to Google,” Smith said.
The owner of both homes wants to sell them for $3 million each, but that includes the land and a new home to be built by local contractor Fred Weaver. Without a new home, the existing properties would cost around $1.9 million each, Smith said.
She held an open house over the weekend, except the homes weren’t open. Instead, Weaver showed plans to prospective buyers in the driveway.
“It was very active,” Smith said, but she hasn’t gotten any offers yet. “It’s a different concept.”
Read it at The San Francisco Chronicle