Bay Area Housing Market Trending toward Normal

"Ho-hum" is the word DataQuick used to describe the housing market in California's Bay Area last month.   A total of 7,595 new and resale houses and condos sold in October in the nine county area around San Francisco, an increase of 6.4 percent from 7,141 the month before and 3.9 percent lower than the 7,902 sold in October 2012.

Sales in October have averaged 8,553 in the years since 1988 when DataQuick started keeping records.  Last month was, therefore 11.2 percent below average.  The October range is from a low of 5,486 sales in 2007 and a high of 13,392 in October 2003.  Bay area sales have not exceeded the average in any month in more than seven years.

The median price paid for a home in the area in October was $539,750, up 1.8 percent from $530,000 in September, and up 29.7 percent from $416,000 in October 2012.   DataQuick estimated that about three-quarters of the 29.7 percent annual increase represented an increase in home values while the remainder was a factor of market mix - more mid- to high-end sales and fewer low-cost inland distressed sales.

The peak price in the area so far this year was $562,000 in July.  This was also the highest median price since December 2007.  Prices peaked in June and July 2007 at $665,000 and by March 2009 the median had fallen to $290,000.  

"At different times in recent years we've had various peaks or troughs when it comes to sales volume, prices, foreclosure activity, cash sales, absentee-owner sales, various home loan options, you name it. All of these market components are now trending toward normal. We are still a ways away, but the market is slowly re-establishing equilibrium," said John Walsh, DataQuick president.

"A lot of market drag can be attributed to skittish market participants, especially buyers and lenders. Comfort levels do rise with more stability and predictability - factors that could contribute to increased activity well into next year and beyond," he said.

The number of homes sold for less than $500,000 dropped 26.4 percent year-over-year, while the number sold for more increased 15.9 percent, DataQuick reported.

Foreclosure re-sales and short sales made up about 14 percent of the existing home market, about the same as in September but down from 35 percent in October 2012.  Foreclosure re-sales represented 3.6 percent of sales and short sales 10.3 percent. 

Buyers brought $2.1 billion in cash to the closing table, either as a down payment or for a cash purchase.  All cash sales appear to have accounted for 22.8 percent of sales in October, down from 23.0 percent the month before and 29.6 percent a year earlier.  

Home buyers borrowed $3.0 billion in mortgage money.  The most active lender was Wells Fargo with almost 15 percent of the market.  No other lenders cracked 5 percent.

Adjustable rate mortgages (ARMs) still figure prominently in the California real estate market.  These loans accounted for 20.5 percent of the Bay Area's home purchase loans in October. That was the highest since 20.7 percent in August 2008.  It was up from a revised 20.2 percent in September, and up from 11.8 percent in October last year. Since 2000, ARMs have accounted for 47.5 percent of all purchase loans. ARMs hit a low of 3.0 percent of loans in January 2009.  The Mortgage Bankers Association said Wednesday that nationally ARMs had a market share of 7 percent the previous week, a number that has varied little over the last year.  As 66 percent of loans in the MBA database were refinances for which ARMs are an exceedingly rare choice, we can assume the national market share of ARMs is slightly less than 16 percent.