Status of the Bay Area Real Estate Market in 2017
After a decade as one of the hottest real estate markets in the nation, Bay Area sales experienced a marked decrease in 2017, although property values remained high. According to a report by The California Association of Realtors, sales for the area, in general, were down 4% in September 2017 compared to the same time in 2016. The hardest hit country was Alameda, with a sharp 15% decline in home sales, followed by Napa at 12.4%, Solano County at 6.3% and Contra County at 5.5%. However, some counties didn’t experience any major dips, while one, Marin County, saw sales increase a whopping 24%.
The culprit for the declining sales is well known, with soaring prices and a shrinking inventory. Home prices surged an average of 11.7%, and analysts warn it’ll take a huge surge in building to see even modest price drops. Meanwhile, home values across the area continue to rise, making it a major seller’s market.
Demographics in the Bay Area
While Silicon Valley attracts a huge amount of millennials, the Bay Area real estate market is still overwhelmingly dominated by the 55-65 age group, many of whom remain unlikely to sell as property values escalate and downsizing is delayed. Millennial homeownership has plunged throughout the area, particularly in San Jose, with many opting to stay at home – and this isn’t due to unemployment. A study by housing website Abodo states 33.3% of San Jose millennials live at home, but only 8.6% are unemployed. They’re simply priced out of the market, and rent – throughout the area – has also become an increasingly expensive burden.
Average prices of housing in the Bay Area Real Estate Market
A study by CoreLogic, a real estate information service, lists average home prices for a single-family Bay Area home at $804,000. In certain areas, such as San Mateo County, located in the high tech Silicon Valley enclave, the average price is well over a million, at a current $1,310,000. The inventory is so small; houses routinely sell for upwards of $200,000 above the asking price, which is great news for sellers but not for buyers, with the affordability crunch pushing many potential homeowners out of the market.
Reasons for growth and outlook for 2018
The inventory crunch throughout the Bay Area is unlikely to ease anytime soon. A study done by the Bay Area News Group suggests a 20% increase in home building would be needed to achieve a 10% drop in prices. Reflecting the supply, home prices are expected to climb, as are mortgage rates. In addition, as more urban properties are designed, new micro-suburbs in urban areas are starting to pop up, although homes in these areas are expected to be on the higher end. The Bay Area will remain a red-hot seller’s market for the foreseeable future, with homes being snapped up instantly in many cases after being put on the market, for far above the asking price, with offers hundreds of thousands of dollars above the list price the norm. San Jose is widely predicted to emerge as the hottest real estate market in the country with Zillow predicting an 8.9% increase in home values.