Bay Area May Market Report: Prices Increase 9.9% in May, Funk Coming
Redfin’s monthly Bay Area real estate market report draws from our proprietary database of information on homes for sale and that just sold, along with insight from our agents to get a sense of what’s going on in the market right now. If you’d like to receive the report via email, just sign up.
Howdy Bay Area Redfinnians!
Redfin just released its monthly report on the Bay Area real estate market, which has softened significantly over the past 30 days. Yes, median prices increased 9.9% from April to May, and 32.8% year over year. And yes, the number of house sales that closed increased 10.1% from April to May.
But new activity in May slowed due to a federal tax-credit deadline for buyers to be under contract by April 30. Entering what has typically been a busy season, with seriously low interest rates and a state tax credit that is dwindling fast, the market has been in a worrisome funk.
Inventory has remained low and even still, competition has decreased, especially for lower-priced homes. Months from now, we expect these trends to show up in other reports, but we feel it in our brokerage now.
Inventory is Tight…
Let’s dive into the numbers. The number of single-family homes for sale declined across four of the six core Bay Area counties:
| County | Compared to April 2010 | Compared to May 2009 |
| Alameda County | -4.7% | -9.0% |
| Contra Costa County | -3.6% | -13.7% |
| San Francisco County | -0.2% | -7.8% |
| San Mateo County | +2.5% | -2.3% |
| Santa Clara County | -5.1% | -20.7% |
| Marin County | +0.7% | -13.8% |
# of Houses for Sale in May 2010
“Overall things feel slow,” said Redfin San Francisco agent Gina Pio Roda. “Many of my clients are on vacation right now, and for the rest the inventory isn’t that exciting. Three clients have expanded their search from the City to include places like Burlingame or Marin because there are so few single-family homes for sale in San Francisco.”
And Sales Volume Increases in May…
Driven by the federal tax credit, May sales volume in the Bay Area increased across all six core counties. For sales of single-family homes, the biggest increases came in San Francisco and Santa Clara Counties:
| County | Compared to April 2010 | Compared to April 2010 Adjusted for # Weekdays |
Compared to May 2009 |
| Alameda County | +13.0% | +18.3% | -0.3% |
| Contra Costa County | +3.1% | +8.0% | -7.7% |
| San Francisco County | +14.7% | +20.1% | +18.3% |
| San Mateo County | +7.9% | +13.1% | +15.4% |
| Santa Clara County | +14.3% | +19.8% | +14.9% |
| Marin County | +9.8% | +15.0% | +33.1% |
# of Houses that Sold in May 2010
The increase in sales volume was even more impressive given that May had fewer weekdays than April; virtually all closings occur on a weekday, when escrow offices are open. The table’s middle column reflects the increase in the number of closings per weekday, comparing the May 2010 rate to April 2010.
But Price Increases Beginning to Flag…
We expect Bay Area sales volume to dip at least in July. For now, prices increased in May across all counties except San Francisco and Marin, driven in part by the absorption of significant foreclosure inventory in the East Bay. Don’t get too excited though. The momentum of price increases on the Peninsula has definitely slowed:
| County | Change in Median Price Since April 2010 | Change in Median Price Since May 2009 | Change in Median $/SqFt Since April 2010 |
| Alameda County | +18.8% | +30.9% | +6.3% |
| Contra Costa County | +7.9% | +29.9% | +9.7% |
| San Francisco County | -3.8% | +2.0% | -7.0% |
| San Mateo County | +0.3% | +4.9% | +5.2% |
| Santa Clara County | +1.6% | +29.8% | +5.3% |
| Marin County | -0.9% | +10.7% | +3.3% |
Change in Median Price of Houses That Sold in May 2010
The neighborhoods most likely to withstand price drops are those with good schools. “Prices in the neighborhoods with good schools are staying strong if not increasing,” said Redfin agent Miawand Bayan, who covers the southern and eastern portion of the Bay Area. “Fremont’s Mission District and San Jose’s Evergreen District are seeing a lot of offer activity and are also seeing sale prices increase month over month.”
Bidding Wars Becoming Less Common
To gauge the direction the market is headed this summer, Redfin also monitors the competition its agents and customers face in negotiating May deals set to close in June or July. The Bay Area deals that Redfin negotiated over the past month saw a big drop in competing offers:
| Listing Price Range | January 2010 | February 2010 | March 2010 | April 2010 | May 2010 |
| Listings >= $500K | 66% | 85% | 84% | 79% | 75% |
| Listings < $500K | 85% | 92% | 95% | 82% | 62% |
| All Listings | 73% | 88% | 88% | 80% | 72% |
Percentage of Offers Handled by Redfin That Faced Competition
Now most deals are still competitive, which we don’t see in hardly any of the other markets we serve, but the competition has gotten less intense over the course of the spring. The drop was particularly sharp for listings priced below $500,000, as many buyers in that price range had either negotiated a deal by the tax-credit deadline or decided to take a break from their home search:
Strangely enough, lower interest rates have made the effective cost of any house over $300,000 lower now than when folks were hurrying to beat the tax deadline. The difference is that home-buyers knew exactly when the tax credit was going away, but low interest rates have a more uncertain future.
And that’s all the new data we have for this month. To dive into more detail, just look at the raw numbers in this spreadsheet. Or check out the methodology for our reports here. In a couple of weeks, we’ll email you again with a digest of all the reports issued by others on the state of the market. Until then, email me with questions or comments, and have a good June!
Best, Glenn
CEO, Redfin
