July Market Update: Greater Bay Area
Key News and Trends in July:
Data released on July 8, 2020 by Johns Hopkins University, showed that California was among 12 states with record-high, seven-day averages for daily new coronavirus cases. California also saw a surge in the number of hospitalizations. Gavin Newsom said at a news conference on July 8th that over the previous two weeks, the state has seen a 44% increase in hospitalizations and a 34% increase in intensive care unit (ICU) admissions.
In our May newsletter, we cited the same sources, which predicted that nationwide hospitalizations would be near zero by July. Now, experts predict that hospitalizations will continue to trend upward as we head later into the year. This will prolong some of the negative economic effects that the pandemic has already induced—nearly one in every six California workers is out of a job, and many others face reduced hours.
Meanwhile, the California housing market remains resilient. After falling to the lowest level since the Great Recession, California’s monthly sales rebounded in June with the largest month-to-month increase in nearly 40 years – after falling to the lowest level since the Great Recession.
On July 13, California Association of Realtors (CAR) President Jeanne Radsick said, “Home sales bounced back solidly in June after hitting a record bottom in May, as lockdown restrictions loosened and pent-up demand driven by record-low interest rates roared back. While the momentum is expected to be sustained as we kick off the third quarter, the resurgence in coronavirus cases remains a concern and may hinder the market recovery in the second half of the year.” June’s sales total climbed 42%. The month-to-month increase was the largest since CAR began reporting monthly sales in January 1979.
A strong surge in home sales in June provided support to home prices, as the statewide median price set a new record high after dipping briefly below $600,000 in May.
California’s median home price reached $626,170 in June, improving 7% from May and 3% from June 2019. The monthly price increase was higher than the historical average price change from May to June and, in fact, was the highest ever recorded for a May-to-June change.
July Housing Market Updates for the Greater Bay Area
In the month of June, single-family home prices rose to their fourth-highest levels on record at an even $1 million.
Looking at the yearly price data, single-family home prices were up 4% from this time last year. In the previous month of May, prices were down 3%, marking a 7% rise when compared to the year before.
All Greater Bay Area counties saw an increase in prices. Counties farthest from the economic centers of San Francisco and Silicon Valley recorded the biggest price gains with Solano up double digits.
Median condo prices posted mixed results with counties farthest from the major economic centers, recording the largest gains including Napa, Solano, Marin, and Santa Cruz. In the markets with more density and condos, prices struggled, particularly in Santa Clara where prices fell by double digits.
The Greater Bay Area’s prices tend to be buoyed by lack of supply compared to demand. As we continue to report, the biggest impact has been on sellers who face logistical challenges in selling their homes, such as the safety of inviting prospective buyers into an occupied home. The majority of sellers are simultaneously buyers themselves, which means they are navigating two transactions. For this reason, sellers have taken a tempered approach to entering the market.
Unfortunately, COVID-19’s rise seems to have amplified buyer and seller tendencies. Weekly new listings for both single-family homes and condos are having a tough time rising above pre-pandemic levels. New listings for condos are lower than they were in early March. Single family homes finally eclipsed pre-pandemic levels during the first week of July… by one listing.
Meanwhile, buyers have been more aggressive. Matt Levin, head Housing and Data journalist for CalMatters, argues that prolonged record-low inventory coincided with the huge millennial generation reaching home buying age. Much of these hopeful and credit-worthy home buyers built up the savings to meet tight lending standards. These home buyers still want access to homeownership. Additionally, buying before the pandemic had its own set of risks, especially in the Greater Bay Area, such as entering into a bidding war or paying as much as 5%–10% over list prices for homes or condos. Arguably, these risks were greater than the risks today associated with committing to a mostly virtual transaction.
To address Levin’s point, the Greater Bay Area’s homes under contract have far surpassed pre-pandemic levels, albeit the rise in homes under contract tapered in June as new of the prolonged pandemic set in.
We can also take a look at home sales—the result of homes under contract that close within 30 days—on a monthly basis. Compared to May, home sales in June rebounded in all Greater Bay Area markets. In Sonoma and Santa Cruz, sales more than doubled.
Together, fewer listings and higher sales moved inventory levels back down. Measured weekly, we can see the levels for both single-family homes and condos trending lower every week in June.
Record prices indicate that there are not many bargains on the market. However, June’s sale-to-list ratios—which compare the prices buyers pay to the original list prices of homes—suggests that buyers are also not paying large premiums due to bidding wars. The chart below illustrates the price that the average Greater Bay Area buyer negotiated, above or below list price, to put a property under contract. In June, both single-family homes and condos sold in line with the original list price.
In summary, as we discussed in previous newsletters, the fundamentals of the housing market were strong before the global economy stalled, and they have continued to show stability. The prolonged pandemic will continue to cause fluctuations in the market, some of which can be measured weekly. It is now more important than ever to have access to the advice of real estate professionals.
Looking ahead to August, we anticipate the undersupply in housing to continue. The COVID-19 spike in California and across the country has created economic and personal unease. Sellers tend to be more timid during this time while buyers are more aggressive, feeding into the undersupply and lifting home prices. As more supply becomes available, there could be a correction in the market, but we do not believe that is likely through the summer months.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we have shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.