Bay Area market take note: buyers have more flexibility compared to the high competition and urgency seen over the last few years. While sellers can expect to see more time on the market and fewer bids, luxury real estate brand Pacific Union, affiliate of Christie’s International, describes the recent shift as a healthy normalization in its quarterly report.
“We expected this normalization,” said Selma Hepp, Pacific Union Chief Economist. “It was natural to see what we saw in the last couple of years given tech employment, incomes rising and the sheer investments in the Bay Area.”
Together with John Burns Real Estate Consulting, Pacific Union’s economic forecast released last year followed the general trend seen in the second quarter of 2016.
Prices aren’t dropping for the Bay Area market, but appreciation slowed to around 3 percent in the second quarter. Luckily, there’s a big cushion for price flexibility in the Bay Area.
Although the Bay Area market has one of the highest income standards in the nation, there’s a ceiling, Hepp explains. Couple that with the inventory problem, and the Bay Area is experiencing a ‘healthy plateauing’ of the market, she says, not a steep decline.
“Bubbles are usually based on unfounded economic fundamentals,” she said. “The majority of purchases [in the Bay Area] are either all cash, or have large down payments.”
San Francisco market conditions made clear
In San Francisco, homes came off the market more leisurely in the second quarter. Hepp says the slight slowdown is related to sellers’ high expectations, conditioned by previous overbids and rapid price appreciation.
“A lot of what we were seeing before was multiple bids and very aggressive buyers, and I think that turned a lot of people off,” she said. “Now, there are more properties online, and buyers can be more scrutinizing with their wants.”
Looking at Pacific Union’s new quarter insights data, single-family home prices were up 3.8 percent since the second quarter of last year.
Much-needed inventory rose 7.1 percent year-over-year in Q2 to reach 902 single-family listings. Sellers of detached properties received around 113 percent of list price, down from almost 118 percent last year. Time on the market for single-family homes was around 64 days. Last year, the average time on the market during the second quarter was around 57 days.
Given San Francisco’s stance as a leading international buyer market, the market correction could intensify due to the global economic state, along with Brexit and China’s constricted financial markets. So far, however, San Francisco has fared well compared to other in-demand U.S. markets for foreign buyers – Miami and New York City, specifically.
“We were expecting things to slow down from international buyers due to stock market volatility, even since the beginning of the year,” Hepp said. “We haven’t seen as much of a slowdown [as other cities] in the luxury market. We’re actually doing well, comparatively speaking.”
Silicon Valley buyers in less of a rush?
Sellers in Silicon Valley became accustomed to six or more offers on their properties a year ago. In the second quarter of 2016, however, homes for sale in Silicon Valley generally attracted between two and four offers.
Sales slowed at the high-end of the Silicon Valley market, the report says. Keep in mind, luxury in Silicon Valley is considered above $3 million. Those under that mark went off the market quickly.
According to the daily updated data, home prices in Silicon Valley were up 8.3 percent annually as of July 21. Also, year-over-year inventory rose almost 9 percent. Sellers received 103 percent of asking price, on average.
List-to-close time has steadily rose over the last year, reaching around 54 days in the second quarter. In the second quarter, around 20 percent of homes in Silicon Valley never hit the MLS, a drop from 30 percent in the first quarter.
