Despite the chronically tight housing supply, home sales are increasing in the Bay Area — but not among homes under $500,000. They are becoming an endangered species.
Homes under $500,000 are becoming an endangered species in the Bay Area.
The region’s sales of single-family homes in that price range fell 17 percent in June from the same time a year ago simply because there are so few to be had.
At the same time — despite the fact that the housing supply is at historically low levels — the overall number of Bay Area homes sold actually increased. That’s largely because job growth continues to fuel demand for homes among buyers who wield substantial incomes, many of whom are employed by Apple, Google and other tech companies.
Across the region, June sales grew 9.0 percent year-over-year for homes over $500,000, according to the CoreLogic real estate information service. That more than compensated for the sales drop-off among the fewer available homes at the low end.
What does all this mean and why does it matter?
It means more and more homeowners must move to the outer reaches of what is liberally defined as the Bay Area — Tracy, Stockton, Vallejo — to buy something affordable while commuting long distances back to job centers in San Francisco, Silicon Valley and Oakland. That, in turn, has worsened traffic headaches on major roads and freeways.
More broadly, it means the region is in danger of losing a workforce it cannot function without: teachers, office workers, service industry workers.
“The economy doesn’ t run on people earning over $150,000 a year, ” said Sereno agent Roxy Laufer, who recently watched two of her clients, both teachers, consider a move to San Diego because they feel priced out of the Bay Area.
Based in the South Bay, Laufer expressed excitement over the robustness of the market, but wondered about the long-term impact of rising prices: “If we are driving out the people who do necessary work, what is going to happen?”
In Santa Clara County, listings are about 35 percent below where they were a year ago, and inventory already was thin then. Yet, according to many agents and brokers, aggressive bidding and multiple offers are the norm this summer. One property in San Jose’s Cory neighborhood recently drew 34 bids and sold for the increasingly common “over asking” — above the listing price.
In the East Bay, according to an analysis by the Bay East Realtors Association, the first six months of the year showed fewer homes available, but more sales and higher prices compared to the first six months of 2016. In central Contra Costa County, which includes Walnut Creek, inventory dropped 9.0 percent while sales rose 10 percent and prices increased 7.0 percent.
A report from CoreLogic reiterated that single-family home sales rose across the region in June, despite the tightening inventory. On a month-to-month basis, some of the jumps were sharp: 9.9 percent for the region as a whole; 14.0 percent for Alameda County; 18.9 percent for Contra Costa County. The rise in Santa Clara County was more moderate, up 4.8 percent from May.
The increased activity suggests the region is “quickly burning through its supply of homes for sale, ” said Andrew LePage, research analyst for CoreLogic. With inventory down, buyers seem to be moving through what is available at a faster clip.
Of the eight counties covered by CoreLogic’s report, only one posted a median sale price below $500,000: Solano County, where the median sat at $400,000 in June.
No wonder Vallejo — Solano County’s port town, once famous for crime and gangs — has been reborn as a hot market for real estate. In fact, it has become the hottest market in the country, according to realtor.com.
There are relative bargains to be had there. But, one would bet, not for long.