• The Bay Area’s decline in home sales (single-family and condominiums) improved in July, with only a 3 percent less activity year over year after a 13 percent decline in June.
• Inventory finally improved, up by 2 percent, after 16 consecutive months of year-over-year declines.
• Inventory above $1 million increased by 17 percent, mostly driven by more homes for sale in Santa Clara and San Mateo counties.
• Only Sonoma and Napa counties gained inventory below $1 million, up by 17 percent and by 5 percent respectively
• In contrast, San Francisco still lost inventory across all price ranges in July, declining by 14 percent. Contra Costa County saw inventory drop by 5 percent from July 2017.
Year-over-year change in inventory by Bay Area county
I am trying to understand what 17% more inventory means. In Lynbrook high school area, currently there are about 13 SFHs. So it was 11 SFHs last July. That’s 17% more homes this year.
How many of you actually read that report? There are tons of data there.
A look at absorption rates suggests that Santa Clara County buyers are fatigued, particularly considering 20-plus percent increases in home prices seen since the beginning of the year. Absorption rates measure the ratio of sales to available inventory. Table 3 summarizes changes in absorption rates from last July. Santa Clara County’s absorption rate declined by 13 percentage points, from 52 percent last year to 39 percent today. The largest decline was for homes priced below $2 million, a 16 percentage point decline from 49 percent to 33 percent. Absorption rates for homes priced above $3 million continued to fare better across the entire region except for in Marin County. Marin County is another Bay Area housing market where buyers are exhibiting signs of fatigue.
Table 3: Year-over-year changes in absorption rates by Bay Area county and price range
Lastly, despite buyer reluctance, median home prices continued to trend higher in July. The Bay Area’s median price increased by 12 percent year over year, with Santa Clara County’s 20 percent increase leading the pack. With strong median price growth since the beginning of the year, the Bay Area’s overall median price is up by 15 percent year to date compared with 2017. Table 5 summarizes median prices by county and year-over-year growth. All Bay Area counties continued to post price gains in July, ranging from 6 percent in Napa County to 20 percent in Santa Clara County. Note that compared with previous months, the rate of median price growth has slowed in most areas except in Contra Costa, Marin, and San Mateo counties. While on average price growth has slowed by about 5 percentage points, there are variations across counties.
Table 5: Median home prices and annual changes by Bay Area County
Figure 4 illustrates year-over-year changes in home prices historically in the Bay Area. The rate of median price growth has averaged 6 percent, though there were much larger swings following the housing collapse in 2009 and the subsequent absorption of distressed inventory. However, when looking at numbers since 2013, median price growth averaged 8 percent until the beginning of 2018, when it jumped to 15 percent. Thus, when discussing slowing of price growth, it is from this year’s peak and back to last five-year average.
Figure 4: Year-over-year change in median home price for the nine-county Bay Area
Just like some of you out there, having followed the stock and housing markets for the last 25 years, I have a sense for bubbles. Typically bubbles are characterized by the now famous “irrational exuberance”. With so much gloom and doom around the housing and stock markets now, I feel we are still not near the peak. What do you think? When so many people are calling the market dead, it implies that there are still a lot of buyers out there that will convert.
Slowing down from a seller’s market to just neutral is not busting of any bubble. It’s just going back to normal, calmer days. I am not sure we are even there yet, just want to point out a mere slowdown is not the same as bubble popping.
Are you expecting prices go up by 15 to 20% a year every year?
d price/ d time is still positive.