Bay Area Real Estate Enters the Twilight Zone (October Insider Report)
Redfin’s monthly Bay Area real estate insider 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!
Here’s the blast of proprietary Redfin data and agent insights on what’s going on with Bay Area real estate. The news is: it’s a mess.
October sales volume seems to have settled down before drifting toward its likely low-point in January, prices are wobbly, buyers are out in force but mostly to low-ball over-priced listings or lose out on the occasional hot property. Most sellers are waiting for spring, so inventory has actually dipped. Redfin demand is up 3% since September.
Meanwhile, Redfin just launched a nifty technology for clustering listings, an interactive Good Faith Estimate, an interactive HUD-1 statement, and inspector’s report with gnarly photos. We also opened Las Vegas and Austin, so if you know anyone who wears cowboy boots — and let’s be honest, you probably don’t — tell ‘em about Redfin!
With that, we’ll dive into the numbers, and some juicy anecdotes, too…
Sales Volume Mixed: The Bleeding Mostly Stops
After three months of scary double-digit declines, October sales volume was mixed in the Bay Area, with big drops in Alameda and Santa Clara Counties since September, and very modest gains almost everywhere else. Since the sales numbers are positive only after being adjusted for the number of weekdays in the month, we can’t quite call this encouraging news:
| County | Compared to Sept. 2010 | Compared to Sept. 2010 Adjusted for # Weekdays | Compared to October 2009 | Compared to October 2009 Adjusted for # Weekdays |
| -14.7% | -10.7% | -29.3% | -26.0% | |
| -0.3% | +4.5% | -19.7% | -15.9% | |
| -6.9% | -2.4% | -16.8% | -12.9% | |
| -1.8% | +2.9% | -20.5% | -16.7% | |
| -2.9% | +1.7% | -17.1% | -13.2% | |
| -12.5% | -8.3% | -29.9% | -26.5% |
Change in # of Houses That Sold in October 2010
Note that sales were much higher in October 2009 but you have to take this bad news with a grain of salt too: there was a big spike in activity back then because the initial home-buyers’ tax-credit was set to expire.
At Redfin, the number of customers touring properties in October increased 10% since September and 7% since July — traditionally the peak of home-buying season — but the number signing offers increased only 3% since September, and dropped 26% since July.
Most buyers are in what Redfin’s Miawand Bayan calls a twilight zone: endlessly touring properties as if in a dream where you never stop walking around — but rarely buying. Desirable homes are in short supply until spring, and buyers are waiting for big discounts on all the rest.
Gina Pio Roda, the leader of Redfin’s San Francisco agents, has seen activity shift down-market, where prices have continued to appreciate. “The high-end has slowed down for us while purchases in the $500,000 – $800,000 range have picked up, mostly for condominiums near downtown, and single-family homes in the city’s outer districts,” Gina said. “In the past month, we’ve also been taking more people on tours of short sales and bank-owned properties. We take on a lot more short sales because we can sometimes push the deal through in 90 days, whereas it used to take six-plus months, usually for the bank just to reject the deal.”
Prices Are Mixed, Too: A Tale of Two Markets
Prices have also been mixed, with Alameda, San Francisco and Santa Clara Counties posting monthly gains, but Contra Costa, Marin and San Mateo counties dropping. For the first time in nearly two years, the annual trend is mostly moving backwards, with four of six counties declining since October 2009:
| County | Median Price in October 2010 |
Median $/SqFt Change since Sept. 2010 |
Median $/SqFt Change since October 2009 |
| Alameda County | $425,000 | +3.4% | +6.1% |
| Contra Costa County | $270,000 | -6.9% | -8.5% |
| Marin County | $745,000 | -5.7% | -2.0% |
| San Francisco County | $703,000 | +3.4% | -2.4% |
| San Mateo County | $652,000 | -2.0% | -0.9% |
| Santa Clara County | $599,500 | +2.1% | +8.0% |
Change in Median Price of Houses That Sold in October 2010
As the Bay Area prices enter a winter lull, Bay Area buyers and sellers are still at a stand-off on price, with many Redfin buyers seeking 5% – 10% discounts off the asking price, while most sellers are usually only willing to give 2% – 4%. When faced with an offer 10% under asking, the sellers we’re dealing with would rather test the whole market with that price before awarding it to a single buyer.
“I’ve been advising my home-buying clients that we may be in a better position in December, with more motivated, flexible sellers,” said Brad Le, the leader of Redfin’s Silicon Valley team of agents. “Sellers get a bit more anxious before the holidays, knowing that activity in general is about to drop off significantly.”
Brad also sees pressure building for price reductions. “Since October, some listing agents have definitely been feeling the pain, strongly encouraging us to write up even low offers. This is sometimes more about showing clients they’re beating the bushes for offers than it is about getting the deal done. The low offer is often just a prop for discussing a price reduction.”
Inventory Declining: Nobody Wants To Sell At These Prices
As we predicted last month, inventory declined across all counties from September to October. Compared to last year though, when the tax-credit frenzy was at its peak, the number of houses for sale is much higher:
| County | Compared to September 2010 |
Compared to October 2009 |
Months of Supply |
| Alameda County | -6.1% | +43.7% | 4.1 |
| Contra Costa County | -6.8% | +26.5% | 3.2 |
| Marin County | -12.2% | -0.4% | 5.7 |
| San Francisco County | -2.1% | +29.8% | 3.7 |
| San Mateo County | -10.0% | +18.4% | 4.0 |
| Santa Clara County | -15.9% | +10.9% | 3.4 |
Change in # of Houses for Sale on October 31st 2010
Check out the months of supply. When it dips below six months, most economists consider the market to be strong, but probably not in this case: Bay Area supply is always tighter than the rest of the U.S., especially for single-family homes, and one reason there are so few listings now is because most would-be sellers are sitting out the winter.
Across the entire Bay Area, it has been a tale of two markets, with most sellers refusing to reduce their price or withdrawing their listing entirely, while a handful of hot properties get snapped up on the day of their debut. It has been a tough rhythm for home-buyers, who have to wait and wait for overpriced listings to fall, then hurry to act when a well-priced listing debuts.
Where Bidding Wars Rage Unabated
On the Peninsula, Redfin is still seeing bidding wars in Cupertino, Palo Alto, Burlingame and Foster City. “I have one client who jumped on three new listings in Foster City and Redwood Shores in the past month,” said Redfin team lead Brad Le. “Two of the homes were only listed for a few days and the other home was only on the market for one day. In all three cases, the sellers got multiple offers, and in all three cases the winning offers were so strong that other buyers weren’t even asked to counter.”
About ten days ago in San Francisco’s NoPa neighborhood, just north of Golden Gate Park’s panhandle, a two-unit listing distributed 54 disclosure packages and generated 27 competing offers.
And according to Redfin team lead Miawand Bayan, well-priced, desirable homes in the South and East Bay still “get eaten up faster than the turkey on a Thanksgiving table.” Last week, Miawand saw one San Ramon listing go under contract within 8 hours of being listed.
Meanwhile, what has surprised me is how long my favorite listing has lasted. Why hasn’t anyone bought this beautiful old firehouse? Want to dig into the raw data? Just download our spreadsheet. Questions or comments? Post ‘em below! Thanks as always for your Redfin support, and have a good Thanksgiving.
Best, Glenn
