The median home price in the Bay Area ballooned by 43 percent during the past year to $620,000 in June, up from $435,000 a year ago, according to ZipRealty, the Emeryville-based online brokerage.
The Bay Area leads the nation in year-over-year growth, followed by Sacramento with 41 percent, Los Angeles with 31 percent, Las Vegas with 30 percent and San Diego with 25 percent.
Meanwhile, the number of homes on the market in the Bay Area has dropped by 32 percent to 7,961 from 11,662 a year ago.
The fire burns brighter in particular parts of the Bay Area (like San Francisco, where the median price hit $1 million in April)
Still, that type of growth is phenomenal — and likely unsustainable. So, how long before prices level off?
The drop in inventory indicates that we’re in a supply constrained market, which could entice more sellers to put their homes on the market.
“After months of runaway prices and a near-desperate inventory situation, the Bay Area housing market is starting to replenish itself,” said ZipRealty CEO and President Lanny Baker “Home owners across the region now see increased values, tight bid/offer spreads and lightning fast sales, and they’re reacting by putting more homes, and particularly more attractive homes, on the market once again. It’s a welcomed break in the trend even if it ultimately means prices start to cool off a bit too.”
But, what do rising home prices really mean?
I asked economist Christopher Thornberg of Beacon Economics who is best known for rightly predicting the 2008 mortgage crisis (even though no one agreed with him).
In the short term, rising home prices are good for people who were underwater, meaning they owe more than their house is worth, because their homes will go up in value and their mortgage won’t seem as horrible.
Employment is up in the Bay Area giving people courage to buy and pay for homes.
But, in the long term, rising home prices chop away at affordability, which can be detrimental to the entire economy.
“You go very quickly from market that is enjoying the welcome, positive impacts for existing homeowners to employers saying ‘Holy cow, I can’t pay my workers enough money for them to afford to live here,’” Thornberg said.
For all the talk of regulations pushing employers out of California, the more likely culprit is housing prices.
One way to keep affordability in check, Thornberg said, would be to significantly increase the housing stock — meaning build more homes.
Existing inventory is not going to solve the problem.
People only sell their homes when they are either forced to (foreclosure, divorce, job relocation) or they have somewhere else to move — which many would-be sellers in the Bay Area lack.
Yes, you might be able to make a hefty five or six-figure sum by selling your house, but you won’t be able to afford anything else.
Apartment rents have also soared, especially in San Francisco and on the peninsula
So, really, the only people who might be able to capitalize on the market boom are empty-nesters who want to downsize or people moving to a less expensive region.
Now, where can we put more homes in the Bay Area to calm our raging housing market? Well, that’s another conversation
Until Next Time…..