Author: Rainy Hake, Executive Vice President, Alain Pinel Realtors
As the summer heats up – so has the market! At Alain Pinel Realtors, we just finished our best month on record – writing and closing just over $1 billion in a single month. This was aided in large part to the increases we are seeing in home prices across the Bay Area. According to DataQuick, a reporter of MLS data, the median home price in the nine-county Bay Area hit a 5-year high last month at $519,000. This is the highest median price seen since March 2008.
The story on the Peninsula is very similar, but magnified due to the highly desirable Peninsula neighborhoods and communities that are able to garner top dollar. Let’s take a look at the numbers from the most recent month in San Mateo County:
Prices are up. The numbers on the Peninsula are clear – prices are rising. In May 2013, the median price of sold homes hit $957,000 – not only a 25% increase from last year, this also marks the 4th consecutive month that prices are up over the previous month.
Sales are up. While sales overall are down slightly (2.9%) from last year, we are still seeing large increases month-to-month (up 13.7%). In fact, this month represents the 5th consecutive month that the number of sales has increased.
A lot of the numbers can be explained because of inventory. Inventory, measured by months of inventory (the amount of time it will take to eliminate all current inventory in the market based on current sales), has remained constrained for well over a year now. It currently stands at 1.3 months in San Mateo County and we have not seen anything higher than 1.8 in the past 15 months.
With such low inventory, buyers have seen an incredibly competitive market that has driven up prices. It is worth noting that houses are still selling – they’re just selling at a very quick pace, not allowing the inventory to build up. This means there are still many new listings coming on the market for buyers; they just don’t stay long.
While the numbers are able to tell you a decent amount about the market today, we are starting to hear about some changes from our agents on the ground. Interestingly, while the past several months have been filled with stories of multiple offers, we’re hearing that is beginning to slow down. Instead of the 10 offers we have been seeing, our Palo Alto office has reported seeing 3-5 offers on well-priced homes. However, the buyers are still motivated, coming in with strong competitive offers. Hopefully for well qualified buyers, the slight drop in the number of multiple offers coming in offers some relief. Previously we were seeing buyers making around 9 offers before finally landing their dream home.
Another interesting development for buyers to watch is interest rates. According to FreddieMac, the rate of 30-Year Fixed-Rate Mortgages ticked up to 3.93% earlier this month, whereas it has been hovering around 3.5% all year. While this is a minor uptick, it does emphasize a point we’ve made here before: these historically-low rates are not permanent. While I’ve noticed several articles about the interest rate increase that may scare off buyers, these rates are still incredibly low and should be taken advantage of. Increasing interest rates could still result in some buyers (especially investors) exiting the market.
While there are still great opportunities for sellers, there seems to be some movement opening opportunities for buyers. With the recent surge in prices, it likely will bring a surge of potential sellers, looking to list their home and take advantage of their new equity. There is no doubt about it – this still is a very competitive market. However, with some buyers exiting the market, a decrease in multiple offers, and a possible increase in inventory coming, we might finally be seeing some welcomed relief for potential buyers. While the overall effect all of this will have on the market will not be known for some months – it does seem that hints of change are in the air.
This article recently ran in the July 28th, 2013 Palo Alto Daily News publication Premier Homes.
Rainy Hakecurrently serves as the Executive Vice President of Alain Pinel Realtors where she plays a role in managing the strategic direction of the company, and also oversees the Marketing, Technology, Training and Strategy departments. She has over 15 years of experience in the real estate industry and holds and MBA from the University of Oxford.