Bay Area Home Prices Rise, Sales Sag (June 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.

Big News Bay Area Redfinnians!

Redfin’s San Francisco engineers just launched a mobile application for Android phones! It’s already one of the top-rated real estate apps, and Android traffic is shooting through the roof.

We’re just now starting to build an iPad app, so if you’d like to join our San Francisco team to help out, apply here or just write back. The whole company meanwhile just set new records for monthly revenues and profits.

As for the Bay Area real estate market, we’re still in the wide Sargasso sea of low prices, low inventory and low sales volume. Sellers are waiting for better prices, and buyers are waiting for better inventory. So here in the middle of the summer, the market is quite still. We think that’s going to change soon.

Prices Up in Five of Six Counties

As you often see at this time of year, Bay Area prices firmed up in June, with five of six counties reporting price increases:

Change in Median Price of Houses That Sold in June 2011

Compared to last year, the numbers are still down almost everywhere except Marin and Santa Clara counties. But most of the past year’s loss came in the last five months of 2010, right after state and federal tax credits expired.

Recent trends have been more hopeful, with prices rising for the past three months, but we can’t really call it a trend until August, when seasonal demand begins to tail off.

Multiple Offers Everywhere Except the South Bay

According to Martin Hendren, Redfin’s Walnut Creek agent, three out of four East Bay transactions are now bidding wars. The same is true of San Francisco and the Peninsula, especially in areas like Cupertino where schools are strong.

Plenty of buyers are getting frustrated. “I just had a buyer yesterday ask about broadening his search to homes that might need a little fixing up,” said Chelsea Bass, a Redfin agent in San Francisco. “He has been bidding on turn-key homes that ended up selling for $100,000 above their asking price.”

Flippers Getting Aggressive in the South Bay

But the South Bay is still a buyer’s market. “South Bay buyers are taking their time and being picky about which houses to make offers on,” said Brad Le, the leader of Redfin’s Peninsula team. “One new development is that we’re seeing a lot more flipped homes selling quickly. Investors are fixing these properties up and dialing in the pricing so that they’re hard to pass up.”

Inventory Off by 15% – 25% From Last Year

The problem almost everywhere is there’s not enough inventory. The number of homes for sale has declined from already low levels in May, and is currently 15% – 25% off where it was last year:

Change in # of Houses for Sale on June 30th 2011

Banks Hesitant to Foreclose

A big reason for the drop in the East Bay is the banks, who are holding thousands of Bay Area foreclosures off the market until the robo-signing litigation blows over. With prices 40% off their 2006 peak, traditional sellers haven’t exactly rushed to fill the gap.

What may loosen things up on the Peninsula and in the city is the IPO market, as lots of local venture capitalists and entrepreneurs have recently been looking to move up.

The Goods Are Odd, And the Odds Aren’t Always Good

For now though, the goods on Redfin’s website are pretty odd, and even then the odds aren’t good. “Buyers are just waiting for new listings,” said Redfin agent Chelsea Bass. “In the meantime, they’re looking at alternative neighborhoods and buying unconventional properties. Four of the last five offers I’ve written have been on foreclosed homes, or estate sales, or short sales where the owner’s bank had to agree to take a loss on the mortgage.”

Mark Biggins, a Redfin agent in Berkeley and Oakland, reports that most of his buyers have put their home-search on hold until more listings hit the market. And Redfin agent Regina Puzon notes that the problem in the upper Peninsula is as much the quality of the listings as the quantity. “With most of the good stuff off the market, many of my buyers aren’t willing to get in a bidding war for a property that has lots of problems.”

A Vapor Pocket in Summer Sales Volume

With so little good inventory on the shelves, it comes as no surprise that sales have been slow. In the first two weeks of June, the stock market dropped and Redfin customers signing offers declined a terrifying 42% in the Bay Area, which shows just how fragile consumer confidence is these days. Since offers take 45 days to close, we expect that to show up in July closings.

Change in # of Houses That Sold in June 2011

According to Amber Zahn, leader of Redfin’s East Bay teams, “even the busiest East Bay towns, like San Ramon, have slowed down quite a bit over the last four weeks.” In late June and early July, offer volume has since returned to May levels, which suggests that August may be a decent month. The number of customers touring homes in the past two weeks has increased 13% from where it was at the beginning of June, suggesting that early-stage demand is ramping up again, which you don’t always see this time of year.

So we go into July waiting for the other shoe to drop, but feel encouraged about August and September. The full spreadsheet, with numbers on almost every neighborhood and city in the nine counties of the Bay Area, is available here. If you have any questions or comments — about prices, the process, local dynamics, or what neighborhoods to look at, or just how to get started — you can post them below, or just feel free to reach out to any of the agents cited in this report:

• Mark Biggins, Berkeley and Oakland, Mark.Biggins@redfin.com
• Martin Hendren, Walnut Creek, Martin.Hendren@redfin.com
• Amber Zahn, East Bay, Amber.Zahn@redfin.com
• Chelsea Bass, San Francisco, Chelsea.Bass@redfin.com
• Regina Puzon, Upper Peninsula, Regina.Puzon@redfin.com
• Brad Le, Peninsula, Brad.Le@redfin.com
• Miawand Bayan, Fremont, Miawand.Bayan@redfin.com
• Frank Wong, San Jose, Frank.Wong@redfin.com

Thanks as always for your Redfin support, and don’t forget to download that Redfin Android app.

Best, Glenn

Bay Area Real Estate Goes out with a Bang! (Dec. 2010 Insider)

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!

Bay Area real estate ended the year with a bang, not a whimper, as December sales ticked up more than most folks expected. But the data is still mixed, as buyers and sellers play a waiting game, one hoping for more price drops, the other for price gains. Demand for listings is feast-or-famine, with some listings languishing for months, while the hot ones get snapped up right away.

We’ll dive into the numbers in a jiff, but first the latest Redfin news: as promised, we launched Redfin in Dallas, with Denver up in the coming week. We also now let you to log-in via Facebook, which will help us personalize your real estate search.

And we now offer our home-buyers an online Deal Room, to guide them through the whole escrow process. Plenty more good stuff is coming up, but we need help! If you know of any dazzling software engineers in San Francisco, recruit them to our cause by replying to this note.

Sales Increase in December, Likely Dip in January

After Bay Area sales declined for four of the five previous months, we saw an uptick in December, with a month-over-month increase in five of six Bay Area counties. But compared to December 2009, when a first-time home-buyer credit was in full effect, sales were still light:

Change in # of Houses That Sold in December 2010

In Redfin’s own business, December Bay Area closings increased 19%. We expect January and probably February sales to be very low though, as the number of people touring properties and engaging agents dropped during the holidays. Further out, we’re more enthusiastic: compared to the last two weeks of December, traffic shot up 42% in the first two weeks of January, and tours increased 36%.

Redfin’s high number of Bay Area closings in December surprised at least some of us. “I guess money never sleeps in the Bay Area real estate market,” said Frank Wong, a Redfin agent in the South Bay. “In the third week of December, when people in most places are just trying to finish up their Christmas shopping, we bid on a Milpitas home on the market for seven days, only to face 10 competing offers. It just goes to show that if the home is priced below market and in good condition, South Bay buyers will flock to buy it, any time of year.”

In San Francisco itself, December activity was light, mostly because inventory there was scarce. Amber Zahn, a Redfin agent in the East Bay, observed that there had been “absolutely no action” in Discovery Bay, Antioch, Oakley and San Ramon but that Dublin and Pleasanton were livelier. “Overall, I’ve had more calls and emails over the past week with buyers doing research and planning for the month ahead,” Amber said. “They are curious on where the market will head this spring and want to begin preparing financially.”

Sellers Wait For Better Times

Inventory declined compared to November, but is still much higher than it was last year, when everything was getting snapped up because of the government’s first-time home-buyer tax credit:

Change in # of Houses for Sale on December 31st 2010

The market has plenty of leftovers that couldn’t sell last summer, but when an attractive new listing comes up, demand is still strong.

Like buyers, sellers are playing a waiting game. “I’ve had three listing appointments in the last few weeks, all from first-time sellers” reports Brad Le, leader of Redfin’s Peninsula team. “They’re all gauging whether or not they want to sell this spring or wait until the market improves in 2012. And they’re all focused on how to prep their homes to hit the market with a picture-perfect debut that commands top dollar.”

Amidst Uncertainty, Prices Drift Down

With selective buyers and hesitant sellers, prices on the homes that are for sale have drifted down. After November prices were mixed, December prices declined across four of the six main Bay Area counties.

Change in Median Price of Houses That Sold in December 2010

Those sellers who are in the market are determined to stay ahead of any price declines, by aggressively pricing their homes. The result: across all Bay Area counties except Marin, the final sale price in December was 98% of the asking price or more. In fact in hot neighborhoods, bidding wars are still the norm. In December alone, Redfin sold or attempted to buy listings with multiple offers in San Francisco, Palo Alto, Milpitas and San Jose, and that’s not even counting the bank-owned listings in the East Bay, which are almost always intentionally under-priced.

And that’s it for another round-up of Bay Area real estate numbers. Want to dig into the raw data? Just download our spreadsheet. Thanks as always for hearing us out, and please let us know what we missed by leaving a comment below!

Best, Glenn
Glenn Kelman | CEO, Redfin
Twitter | Blog

Not a Creature Was Stirring, Not Even a Mouse (November Insider)

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.

Happy Holidays Redfinnians!

Redfin is delivering our holiday bag of agent insights and proprietary numbers on what’s going on with the Bay Area market. There are a few lumps of coal in there: November sales volume is down 15% – 25% and inventory is up as much as 40%, depending on the county; a lot of the homes for sale are foreclosures that are in pretty sad shape.

On the bright side, at least if you’re a home-seller: prices are mixed when most of the rest of the country is down. Nowhere else do we see so many bidding wars, even now, in the middle of winter 2010. And home-buyers are starting to get antsy because interest rates are rising.

Inside Redfin, we’re preparing to launch a big upgrade to the website this Tuesday that allows folks to log-in using their Facebook account. We’re also giving our own customers an online Deal Room for tracking the escrow process and – tell your friends! – we’re opening the Dallas market.

As always, we’re hiring engineers for our San Francisco office, where all the magic happens on Redfin’s search site and mobile tools.

It has been a good year for Redfin, and we’re even more excited about 2011. Thanks for all your support! To get the detail on the Bay Area in November, read on!

Best, Glenn
Glenn Kelman | CEO, Redfin
Twitter | Blog

Another Month of Double-Digit Declines in Sales Volume

Sales volume was mixed in October, but not in November. Activity declined across the board, especially in San Francisco and on the Peninsula. We have now seen broad declines in four of the past five months:

Change in # of Houses That Sold in November 2010

In our own business, Redfin closed 3% more offers in November than October, but early-stage demand declined in that time 15% – 20%. Our guess is that we’re probably still gaining share, but it’s pretty quiet this time of year all ’round.

Prices Mixed

Prices were mixed across the Bay Area, though the trend doesn’t mean much because sales volume was so sparse:

Change in Median Price of Houses That Sold in November 2010

As interest rates have crept up over the past month from 4.17% to 4.61% for a 30-year fixed-rate mortgage, we’ve seen increasing urgency from buyers. “My buyers are getting more motivated,” said Redfin’s Brad Le, “But there’s nothing great out there for them to choose from.”

During the Holidays, More of the Sellers Are Banks

As sales volume has slowed, inventory has begun to pile up, with double-digit increases in almost every county:

Change in # of Houses for Sale on November 30th 2010

There’s more for sale, but the quality is mostly pretty poor. Many of Redfin’s home-selling clients who did not get a sale by October decided in November to take their property off the market for the holidays.

When an attractive home is well-priced, demand is still strong. In the third week of November, Redfin’s Brad Le bid on three Peninsula properties with multiple offers: one in Saratoga had 14 offers, one in Los Altos had four offers, and one in Santa Clara had nine offers. All three properties sold for tens of thousands above list price. We saw the same phenomenon last month in the Mission area of Fremont and the Berryessa area of San Jose.

With buyers in a picky mood, there is more pressure on the listing to be perfect. “In a price-sensitive market,” Redfin’s Frank Wong says, “the fit and finish of the home and the price are critical.”

The pretty properties stand out because most of the listings we’re touring over the holidays are distressed sales. Redfin’s Amber Zahn has not seen any decrease in bank-owned properties, despite the temporary suspension in foreclosure activity. This is consistent with a nationwide trend.

In San Francisco, Redfin team lead Gina Pio Roda has noticed that activity is concentrated on short sales, where the seller is listing the property for less than the amount she owes the bank. “Especially during the holidays,” Gina says, “short sales are entering the market faster than they can be purchased.” Miawand Bayan, Redfin’s team lead for the southeast Bay Area, has noticed that banks are approving short sales more quickly, but it still takes three months or more, and at least one in four deals falls apart completely.

That’s it for the last Bay Area report of 2010! Want to dig into the raw data? Just download our spreadsheet. Questions or comments? Just post ‘em below! Thanks as always for your Redfin support, and happy solstice!

Redfin Releases Clustering in the Bay Area!

We just made a big upgrade to the Redfin search experience by clustering your map search results based on the number of homes for sale.

Get all the details on our main blog and let us know what you think!

Bay Area Home Sales Drop for 3rd Straight Month (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 latest blast of proprietary Redfin data and agent insights on what’s going on with Bay Area home prices!

September sales volume dropped like a rock for the third straight month, but the number of homes for sale and the prices that homes sold for have been mixed to up.

Traditional sellers have been unwilling to accept low prices, and with all the delays in the foreclosure process, banks haven’t been able to force their hand.

As a result, bank-owned listings are getting a bit more scarce in the East and South Bay, the inventory is mostly picked-over in San Francisco, while bidding wars are still — still! — common in Palo Alto and Cupertino.

What’s going on with our business? The number of people touring Bay Area homes with Redfin is down 10%, which sounds bad, but we expected worse this time of year. We think the market’ll be flat to down, at least until spring.

Meanwhile, we’re hard at work on a razzle-dazzle upgrade to Redfin.com, due out at the end of next week. Read on for the details on the Bay Area market!

Sales Volume Plunges for Third Straight Month

For the third straight month, sales volume declined by double digits in nearly all Bay Area counties. Marin bounced back, but only because its sale volume had dropped so precipitously before, 18.2% in August and 21.7% in July.

Change in # of Houses That Sold in September 2010

As aggressively priced bank-owned inventory becomes scarce, traditional home-sellers are only haltingly filling the gap, testing the market in the East and South Bay at prices buyers are rejecting. “In those areas, it’s not enough right now for a listing price to be competitive,” said Bay Area market manager Catherine Jardine, “To get a sale the price has to be compelling.”

When a new bank-owned listing does debut, otherwise diffident buyers pounce. “Over this past weekend, I handled two offers, one in Cupertino and one in Foster City. Both were competitive,” said Redfin agent Frank Wong, agent for San Jose, Fremont and Milpitas. “Last week, I helped a client with a bank-owned property in Hayward priced 10 – 13% below market value. The home had over 20 offers on it in five days.”

Because of the increasing time it takes to foreclose, those types of deals are becoming less plentiful. Amber Zahn, a Redfin East Bay agent, noticed that Oakland, Berkeley and Alameda are still competitive, but distressed areas like Pittsburg, Discovery Bay and Brentwood have gone “almost totally silent.”

If the recent problems in foreclosure documentation lead to a larger decline in the number of bank-owned listings this spring, traditional sellers and buyers out there will likely have to come to terms at higher prices – but this is still six months off.

Inventory Spikes in San Francisco, Mixed Elsewhere

We already see plenty of evidence that traditional home-sellers are holding out for better days, withdrawing listings rather than letting them sit. Twenty percent fewer homes sold, yet inventory numbers were mixed everywhere except San Francisco, which saw a whopping 21.5% increase. Last month, inventory was declining across the Bay Area.

Change in # of Houses for Sale on September 30th 2010

Many of our customers complain about the low quality of the homes that are available for sale, a situation that we don’t think will change until March 2011. If anything, inventory will drop again with the approach of Thanksgiving.

But what about that inventory spike in San Francisco? Mostly leftovers.

“As usual, there was a flurry of activity right after Labor Day with a lot of inventory hitting the market before the typical year-end slow down in transactions,” said Redfin San Francisco agent Sean Sullivan. “The cream of the crop got picked off while the rest continues to languish. Meanwhile all the bread-and-butter million-dollar-single family homes in Noe, Eureka and Dolores are gone and none really came on the market after August, save one that I got for my client. The super-desirability of these homes leads me to believe that sellers are happy to wait until spring to let demand build over the winter months.”

But Median Price Still Holds Steady

What is really interesting about the three-month drop in sales volume is that it still hasn’t led to a drop in prices. Despite a summer-long decline in sales, prices declined only in San Francisco and San Mateo counties:

Change in Median Price of Houses That Sold in September 2010

Year-over-year, prices increased 4% – 11%. Discounting is still relatively rare except in Marin, where high-end homes often taken longer to sell. In the East Bay, bank-owned properties are still priced to create bidding wars, and on the Peninsula well-priced homes generally sell at or close to list price.

Sale to Final List Price, September 2010

One reason we think the Bay Area market could change quickly is that plenty of home-buyers are still in the market, waiting for better inventory or a compelling financial reason to buy. “It’s still common right now to see multiple offers in Palo Alto and Cupertino,” said Brad Le, the leader of Redfin’s Peninsula team. “The lack of great inventory during the summer months has caused more buyers to be in the marketplace in those towns right now. Many of the buyers we’re dealing with are surprised to discover stiff competition.”

When a listing doesn’t generate offers immediately, prices are dropping quickly. “Listing agents who used to wait four to six weeks for a price reduction are dropping prices in two weeks,” Brad said. “Inventory is thin and, in the absence of competition, demand is fickle. The market is walking a tight-rope right now.”

And that’s it for all the September numbers on Bay Area real estate. Any questions about specific neighborhoods or comments about some of our predictions, just post ‘em below. As always, thanks for your support!

Best, Glenn

Nobody Move! Bay Area Home Sales Seize Up (July 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!

Even though we’ve been busy adding school ratings to our website’s map, Redfin just cranked out our latest analysis of the Bay Area housing market, based on proprietary data and local broker insights.

The news is not good, at least for real estate agents: as federal and then California home-buying credits expired, the overheated Bay Area market began to cool in July, except where technology-driven employment continues to be strong.

From June to July, the mix of buyers has likely shifted away from the first-timers responding to the tax credit. In these situations, you expect to see median prices increase, but even so median home prices were down or flat from June to July in five of six counties.

While inventory declined slightly except in the beleaguered East Bay market, across all six counties sales volume fell through the floor. We think demand is going to continue to ease for the rest of the year, as buyers now take their time, unhurried by either interest rates or tax credits.

Prices Flat to Down in Five of Six Bay Area Counties

The result: the market is definitely softening. From June to July, prices dipped across the Bay Area except on the Peninsula:

Change in Median Price of Houses That Sold in July 2010

The trend was most pronounced in the South Bay and the East Bay. “In the East Bay, we saw demand weaken most for listings priced above $650,000,” said Charmaine Frank, Redfin team lead in the East Bay. “For the first time in over a year, I am finally seeing properties sit in sought-after neighborhoods, even at good prices, sometimes for two or three months. Short-sale buyers are still out in force, and anything below $400,000 is still getting multiple offers, but everyone else got gun shy after the tax credit expired, waiting to see which direction the market would take.”

The decline in demand has made it easier for home-buyers who have smaller down-payments and government mortgage insurance. “In areas where competition is declining, like parts of San Jose, I’m seeing more offers with FHA financing being accepted, mainly on listings under $700,000,” said Brad Le, Redfin’s team lead for the Peninsula. “We’ve started to see the listing agent call the lender to make sure he has the experience to get the loan funded, which is helping everyone get more comfortable with buyers who once were getting blown out of deals right and left. It still takes patience, since an FHA loan usually takes 45 days to close rather than 30.”

Troubles in the South and East Bay haven’t yet reached the remote shores of Palo Alto and San Francisco. “One thing I’ve noticed in the past few weeks is a lot of activity on listings over $1 million, especially in Palo Alto and Menlo Park, where even all-cash buyers have lost out in bidding wars,” Redfin agent Brad Le said. “There’s more activity because there’s better inventory, with more turn-key homes.”

San Francisco has been a microcosm of this gap between the tech-industry haves and the economically anxious have-nots. Desirable neighborhoods close to 101 and 280 have continued to see strong demand, even as the low-end has languished.

“San Francisco is a highly strung market, sensitive to the smallest changes,” said Sean Sullivan, a Redfin agent in San Francisco. “I’m still seeing anywhere from three to ten bids on single-family homes in Noe Valley, Bernal Heights and Eureka Valley, mostly coming from tech workers in Silicon Valley. Desirable homes usually take about a week to go into contract, with sellers only waiting that long to give the house full exposure to all comers. Meanwhile, in the high-end market, above $1.5 million, business is very slow.”

Inventory Declines Except in the East Bay

One factor limiting price declines: scarce inventory. Where others parts of the country are starting to see inventory pile up, in the Bay Area four of six counties saw the number of houses for sale drop:

# of Houses for Sale on July 31, 2010

We actually think the market would benefit from an increase in inventory. Catherine Jardine, Redfin market manager for the Bay Area, noted that the many Bay Area markets have too many listings but not enough of the right kind. “At our home-buying classes in July and August, the refrain from the attendees has been ‘the only things on the market for more than a week are either dumps or overpriced. Why do the good ones have to go so fast?’” Other Redfin agents have noticed that sellers have become more realistic in their pricing.

“Fewer folks are making offers, but it still feels like there’s a ton of buyers out there hunting for the best-priced listings,” said Miawand Bayan, Redfin team lead for the East Bay. “Once a listing hits the market in decent shape and at a good price, it’s as if a group of hyenas found a carcass: they all attack.”

The Hangover is Here: Sales Volume Plunges

But the big news is really the drop in the number of homes sold. While California’s state credit staved off declines in sales volume for an extra month, the July numbers showed sickening declines across all six counties, including even San Mateo County.

# of Houses that Sold in July 2010

In Redfin’s Bay Area business, the number of new customers we meet at properties has declined 13% from its all-time high in the first week of April to the last week of August, but the numbers are up slightly from early July, when business got very light.

And that’s the news from the Bay Area! Check out the full report here. For a review of our methodology, come hither. And if you’ve got any comments or quibbles, just post ‘em below! Thanks as always for your support of Redfin.

Best, Glenn
CEO, Redfin

Prices Up, Fundamentals Down in the Bay Area (June 2010 Real Estate Insider Report)

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!

We just closed the books on Redfin’s analysis of the Bay Area market in June, and saw the first signs of a post-tax-credit correction drift through outlying areas, headed toward San Francisco and the Peninsula.

Why do we think the market is softening? While the median price of a home increased in five of the six core Bay Area counties, declining only in Contra Costa County, supply increased and demand weakened. Despite the federal and state tax credits that overlapped in June, sales volume declined in four of six counties from May to June 2010. And inventory increased across the entire Bay Area.

Inventory Increases Driven by New Listings

The increase in homes for sale across all six Bay Area counties has been driven in part by new listings from traditional home-sellers rather than bank foreclosures, which is good news for the market:

# of Houses for Sale in June 2010

All spring, we saw the same houses sit on the market, often because sellers lacked the money to spruce up or mark down the listing, frustrating buyers. But that has begun to change.

“In the past few weeks, we’ve gotten a lot of activity from people looking to list their home for the summer,” said Miawand Bayan, Redfin agent for Hayward and Fremont. “It came as a surprise to us since we expected new listings to peak when both federal and state tax credits were available. But more listings are being sold by owners, and fewer are being sold by banks.”

In San Francisco, the Peninsula, Berkeley and Oakland, where demand has been stronger, the increase in inventory may bring new buyers to the market. “A lot of my clients have been scouring the market since losing out on a few offers, and the problem they all talk about is inventory, inventory, inventory,” said Amber Zahn, Redfin agent for Berkeley and Oakland.

Demand Weakens in East Bay, Still Strong in the Peninsula, City

Even as some buyers clamor for more inventory, we expect demand to slacken later in the summer, when the California tax credit exhausts its funds. Already, after double-digit increases in sales volume in May, most counties declined significantly in June 2010, compared both to May 2010 and June of last year:

# of Houses that Sold in June 2010

The sales drop is ominous. Typically, sales increase from May to June, as most parents move during their children’s summer vacation. Taking into account the recent 30% sale drop in markets outside California, where the federal tax-credit expiration hasn’t been offset by any state credits, we are braced for a similar hangover in California.

This trend won’t affect the core neighborhoods in the Bay Area any time soon. According to Redfin agents, sales are still competitive in San Francisco and the Peninsula, often to the tune of ten or more offers on a single listing. Redfin agent Brad Le just bid on two million-dollar homes in Sunnyvale and Mountain View, which sold between $60,000 and $80,000 above list price.

“In San Francisco, we are still seeing homes sell for $100,000 over the asking price, particularly in Noe Valley and Bernal Heights,” added Redfin agent Gina Pio Roda. “But in Daly City and South San Francisco, investors are now taking profits, flipping the properties they bought last year to other buyers.”

According to Redfin agents Miawand Bayan and Amber Zahn, competition has eased in the East Bay, in part due to a decreasing number of bank-owned properties on the market; taking up the slack, short sales are now increasing, as banks are approving deals more readily. Overall Redfin’s Bay Area demand was flat or slightly down in June as the market began to stabilize somewhat from the commotion of the national and California tax credits; just this week we’ve seen demand jump, but it’s too early to say if that’s just a flash in the pan.

Median Prices Increase, But for How Long?

What does this mean for prices? In the most sought-after communities on the Peninsula, in San Francisco, Berkeley and Oakland there still may be too much demand to see any immediate price drop, but price increases will be at least moderate. Other areas may lose some of the gains made over the past 18 months, but not in a drastic way; precipitous drops are almost always caused by foreclosures, which appear to be under control.

What’s clear now is that prices increased in June 2010, everywhere except in Contra Costa County.

Change in Median Price of Houses That Sold in June 2010

“The market is very price-sensitive right now,” said Frank Wong, Redfin’s agent for San Leandro, Hayward and Fremont. “If the home is priced well, it will sell, and there will be multiple offers. But even in that case, competition is less intense. In the last three months, I would see eight to ten offers on bank-owned properties but since June it has been more like four to five. On regular sales, we are seeing two or three competing offers instead of three or four.”

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. What do you think? Comment below! Have a good July!

Best, Glenn
CEO, Redfin

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:

# 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:

# 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:

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:

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

Bay Area Bucks the Trend With Rising Prices (May Newsletter)

We always post our monthly newsletter on what’s going on in the Bay Area market here, but if you’d like to receive it via email, just sign up!

Howdy Bay Area Redfinnians!

Here’s the usual digest of everything that moved in the Bay Area real estate market this month. New data came out Tuesday showing a modest increase in Bay Area real estate prices — driven almost exclusively by high-end sales — while to everyone’s surprise, mortgage rates just fell through the floor.

Here at Redfin, we just won a startup of the year award and another for best blog but nationwide our business dipped in the first weeks of May after the federal tax credit expired. Redfin’s California business is still going strong in part because of the $10,000 California tax credit, which has a few more weeks to go before the state’s money runs out.

To gear up for the summer, we’re offering another version of our slightly nerdy, data-driven home-buying class in Palo Alto on Wednesday, June 16. Elsewhere, we’re on stage June 9 in San Francisco with TechCrunch’s Michael Arrington and our friends at Boxee and Aardvark for Atlassian’s Starter Day. And all summer, we’re hosting engineering brown-bag talks at our San Francisco office led by computer scientists from Twitter, Facebook, LinkedIn and Pandora; everyone is invited!

Bay Area Prices Increase 1.5%; Most of the Rest of the U.S. Declines

But enough marketing fluff! Let’s dig into the data! According to an update released this morning, the Case-Shiller index of Bay Area home prices increased 1.5% from February to March:

• Month over month: prices increased 1.5%
• Year over year: prices increased 16.2%
• From the July 2006 peak: prices have dropped 37.4%
• Prices were last at this level in May 2002
• Consecutive months of price increases: 1

San Francisco’s legendary SocketSite blog charts the Case-Shiller data in elaborate detail, showing that the entire gain in March was driven by the high-end and the easing of credit for jumbo borrowers. Looking forward, the data are mixed, as DataQuick reports that prices were down slightly in April, while Redfin’s own analysis found that prices were up.

Redfin East Bay Team Lead Agent Charmaine Frank has noticed that for the first time she is working on home purchases where the seller is relocating outside of California. “I’ve done four re-location deals in the past year — they’re good deals for the buyer, but a lot of legal hassle and a long close — I hadn’t handled one before that in three years. What’s interesting about those deals is that we’re seeing more people move out of California, to Georgia, Seattle, the East Coast.” Meanwhile, Redfin’s new Portland business is almost entirely supported by California refugees seeking lower home prices.

Competition Eases Only a Little

Bay area sales volume increased only 0.2% in April because so many closings were deferred to take advantage of the state credit starting on May 1. Nationwide, the National Association of Realtors reported on Monday that the number of existing homes that sold in April increased 7.6% since March, and 22.8% since April 2009.

Within its own business, Redfin has seen competition among home-buyers decrease. In March, 88% of the Bay Area offers we tendered on a property faced competition whereas the number for May declined only slightly to 73%:

Interestingly, competition was more intense for homes above $500,000 (80%) than for those below (44%), a trend we attribute to easing credit for jumbo borrowers.

Foreclosures: The Beginning of the End

Meanwhile RealtyTrac reported the first significant evidence of a plateau in foreclosures: the number of bank-owned properties coming to market increased by 45% over the past year, even as foreclosure filings decreased in April — by 9% over the prior month, and by 2% over the prior year.

Translation: banks are getting rid of more foreclosure properties than they’re taking in. This trend was even more pronounced in California. There are so many foreclosures that the supply of bank-listed properties isn’t likely to decline significantly any time soon, but for the first time it isn’t likely to increase either. This is exactly in line with our November forecast that bank-owned listings would peak in mid-2010. It’s the beginning of the end, which is especially important for folks in outlying areas like Antioch, Hayward and Gilroy, where the market has been foreclosure-driven.

“We’re seeing fewer distressed properties on the market than we did twelve months ago in Santa Clara, West San Jose and Campbell,” said Redfin South Bay Agent Brad Le. “The banks are finally moving through their inventory of homes. In those same areas, we’re seeing more multiple offers now than we did a year ago in the $575,000 – $700,000 price range. Sellers are pricing these homes just below market value and each home is getting four to six offers.”

Mortgage Rates Plummet

But the big news is the drop in mortgage rates, a drop so large and unanticipated that the Wall Street Journal splashed it across the front page on Monday:

Many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying homes or refinancing their mortgages.

As of May 20, the average rate for a 30-year mortgage was 4.84%. We’ve also seen rates on jumbo loans ease, which is important for the credit-starved high-end of the market. So why are rates going down after years of government debt? The European bond market is so screwed up right now because of Greece that smart money is seeking a safe haven in U.S. mortgages. In the land of the blind, the one-eyed man is king. And as we’ve argued before, interest rates affect real estate prices more than most people realize.

We’re still worried that rates long-term will rise, that foreclosures will remain a major force in the market, that there will a hangover when all the federal and state tax credits finally end. But a little further out, we can’t help but believe that rates this low will give summer home-buyers a real jolt.

Anyway, that’s our call. Let us know your thoughts by writing back — all your responses go directly to me — or leave a comment for everyone to see here. Thanks for your support, and always let us know how we can make Redfin better.

Best, Glenn
Glenn Kelman | CEO, Redfin
Blog | Twitter

Bay Area Market Report: Single-Family Home Prices Up 5.5% MoM in April

Redfin today released new data on the San Francisco Bay Area market showing that the median price of a Bay Area single-family home increased 5.5% from March to April. In Marin County, prices for single-family homes jumped 10% in one month, aided by lower interest rates for jumbo loans. Santa Clara County house prices increased 7% month over month and 33% year over year, driven by a shrinking supply of bank-owned properties. House prices in Alameda, San Francisco and San Mateo counties grew by between 1% and 2% month over month.

Sales Volume Declines, in Part Due to State Credit

Sales volume for single-family homes declined from March to April by 3.7% in the Bay Area. Alameda decreased 14%, San Francisco decreased 12%, while San Mateo increased 2%, Santa Clara increased 1% and Marin County increased by 12%.

Based on its own brokerage activity in April, Redfin expects May sales to increase in the Bay Area. June sales volume is still hard to forecast, but early-stage traffic and customer-activity metrics so far suggest that June will not be as strong as May.

According to Redfin agent Gina Pio Roda in San Francisco, this decline in the number of houses sold in April was driven at least in part by California buyers delaying closings to qualify for the state tax credit beginning on May 1.

“Of the eight deals we were working on at the end of April, four pushed to May, just so our clients could save another $10,000,” Ms. Pio Roda said. “The other challenge our buyers face is simply a lack of available inventory; every deal has four or five buyers, and sometimes goes for more than $50,000 over asking. If there were more homes to buy, there are certainly enough buyers to buy them.”

Redfin agents also noticed that tax incentives motivated buyers in the $500,000 – $600,000 range more than those buying homes above $1 million.

Bidding Wars Still Common

In Santa Clara, San Francisco and Alameda counties, the median sale price was higher than the original list price, indicating that bidding wars are still the norm. In Redfin’s own Bay Area business in April, offers on all property types under $500,000 faced competition 88% of the time; the trailing six-month average was 91%. Competition for mid-range and high-priced homes has actually increased. Offers over $500,000 faced competition 81% of the time in April, while the trailing six-month average was 72%. “We are increasingly see all-cash offers, or offers free of any contingencies, as sellers price their homes to sell,” said Redfin San Jose agent Brad Le.

On the Peninsula, competition is driving buyers from highly sought-after markets like Cupertino to more affordable areas like West San Jose. In San Francisco, the same dynamic is driving house-buyers to consider condos, where developers have become more aggressive deal-makers.

This competitive dynamic is partly driven by listing-agent tactics. “Listing agents are getting more aggressive about listing homes lower than their market value to gain a wave of immediate interest among prospective buyers,” said Redfin Fremont & South Bay agent Miawand Bayan. “Their hope is that the final sales price ends up being much higher than the original listing price. This tactic is most common among listing agents for bank-owned properties. Many bank asset managers are only releasing a few properties a month to keep prices as high as possible.”

Some of these tactics are turning away buyers, especially in the battle-scarred East Bay. “Buyers are getting frustrated losing out on foreclosed homes to all-cash investors,” said Redfin East Bay agent Charmaine Frank. “They’re now looking to traditional sales that are in better shape, even if they’re slightly overpriced.”

Spring-Time Inventory Increases Less Than Expected

In most Bay Area counties, the number of houses for sale rose, a seasonal increase aided by rising prices. But comparing April 2010 to April 2009 shows that inventory is in fact declining year over year.

Change in the # of Houses for Sale in Major Bay Area Counties in April 2010

Even as the amount of homes for sale has decreased because of limited bank-owned inventory, the quality of the inventory seems to have improved. “The quality of homes being listed is definitely increasing,” said Redfin agent Brad Le.

A complete April 2010 report for the Bay Area is available in this spreadsheet:
http://blog.redfin.com/sfbay/files/2010/05/Redfin-Bay-Area-Real-Estate-Market-Report-April-2010.xls

The report includes data on the number of homes for sale, for-sale prices, final prices and the number of homes sold; Redfin segments the data for houses and condos, with data on 11 counties and 50 cities.

About Redfin Real Estate Reports

Redfin’s real estate market reports draw data from more sources than any other, including the Multiple Listing Services (MLSs) that brokers use to take properties on and off the market in real time; for-sale-by-owner websites used to market properties unrepresented by brokers; government records that officially record any property sale; and government records on city and county borders. Because Redfin as a broker has access to MLS databases, it is able to identify market changes before sales are publicly recorded. Unlike other reports, Redfin also provides county- and city-level detail, disclosing the number of records available in each county or city.

No report based on tens of thousands of records, all captured by human beings, can eliminate every error, but Redfin has been careful to do so wherever reasonably possible. Reconciling multiple data sources allows Redfin to correct errors in each; sales aren’t double-counted, and records for the same property but with conflicting prices and square footages are flagged for further analysis. The reports analyze houses and condos separately, and exclude townhouses. More detail on Redfin’s reporting methodology is available here: http://www.redfin.com/about/monthly-report-methodology