Spring Market Is Heating Up

SF Bay Area news outlets are already reporting on a white hot real estate market as we officially move into Spring. Inventory levels are even lower than previous years. Redfin recently reported that more than 45% of homes sold in San Jose went for at least $100K over asking price during the period of January 1 and February 15, 2022.

National & Statewide Stats

Looking at a more macro level, last week the Fed raised interest rates the first time since 2018, with more increases expected. While mortgage rates aren’t set by the Fed – they are typically affected by the bond market – they are expected to rise as well. These increases erode home buying power. On a positive note, unemployment rates continue to drop. The national unemployment rate is 3.8% (as of Feb 2022) while California’s rate is 5.8% (as of Jan 2022).

The FHFA House Price Index measures the changes in single-family home values based on data from all 50 states and over 400 U.S. cities. In 2021, home prices nationwide rose 17.5%. To put things into perspective, during the last housing boom (second quarter of 2005), the fastest annualized increase was 11%. The annual growth rate in each of the last six quarters has been at least 14%. The FHFA Index shows California is ranked #16 in average annual growth, reaching 19.6% growth over last year. When looking at growth over ten years, California lands in the top ten at #7.

Okay, the national numbers show tremendous growth. What’s happening at the county level? Let’s review the most recent market updates for three Bay Area counties: San Mateo, Santa Clara and Santa Cruz.

San Mateo County

Even though inventory is on the rise in San Mateo County – just under 300 homes – it’s still significantly lower than it was in February 2021. As we enter into the Spring market, this bodes well for sellers looking to attract buyers. The picture is particularly rosy for sellers as:

• The median sales price is up 13% when comparing Feb 2021 to 2022.
• On average, homes are closing at 17% over the asking price.
• Days on market are averaging 7 to 9 days (the number of days between listing the home and a ratified contract), and time to close is shortening to 1.2 months.

Santa Clara County

Like most SF Bay Area counties, Santa Clara County’s available inventory is significantly below February 2021 levels. Last year we had about 700 available single-family residences for sale. This past February had only about 400. It remains a sellers market, supported by these statistics:

• The median sales price is up 23% when comparing Feb 2021 to 2022.
• On average, homes are closing at 17% over the asking price.
• Days on market are averaging 7 days (the number of days between listing the home and a ratified contract), and time to close is shortening to .8 months.

Santa Cruz County

The data for single-family residences in Santa Cruz County paints a similar picture to adjacent SF Bay Area counties. Available inventory is down compared to last February but not as sharply. While the numbers are better YoY, the differentials aren’t as significant as other Bay Area counties.

• The median sales price is up 30% when comparing Feb 2021 to 2022.
• On average, homes are closing at 6% over the asking price.
• Days on market are averaging 9 to 10 days (the number of days between listing the home and a ratified contract), and time to close is shortening to 1.6 months.

Townhomes & Condos

With increasing prices, interest rates and low inventory, buyers are shifting their home buying sights to townhomes and condos. Available inventory is drastically down from 2021 levels, with only 200 available properties for sale in February 2022. The Santa Clara County condo and townhouse market report shows similar upticks:

• The median sales price is up 14% when comparing Feb 2021 to 2022.
• On average, townhomes and condos are closing at 9% over the asking price.
• Days on market are averaging 7 to 8 days (the number of days between listing the home and a ratified contract), and time to close is shortening to .7 months.

The Seller's Dilemma

For sellers looking to permanently move out of the Bay Area, the decision to put their home on the market is a relatively easy one. For those sellers who want to remain in the area, the decision-making process is more problematic. With such low inventory levels, many sellers are worried they won’t be able to find their next home before the current one closes escrow. If you find yourself in that conundrum, I have used several strategies to help alleviate those concerns. Please give me a call to discuss your options.

Reach Out & Connect

I’m meeting with clients via phone, video conferencing, and by appointment. Whether you’re looking to buy or sell, you need an experienced guide in this complex and fast-paced real estate market. I’ve helped hundreds of individuals like you successfully negotiate the most important financial transaction you’ll ever make.