The Case for Continued Growth in the East Bay.
Lately, the primary focus of local real estate news has been on determining whether or not the Bay Area housing market has peaked. With every dip and spike, experts have pointed at signs that the plateau is imminent, or that we have already reached it. Of course, some parts of the Bay Area have likely peaked (the Richmond Waterfront, for instance). But there are three reasons to think that this does not apply to the East Bay as a whole.
1. Price Trends: Housing prices have climbed in Alameda and Contra Costa counties for the seventh month in a row, with the average house selling for $570,000 in August. This is up $10,000 from July and $140,000 (a 33% increase) from the beginning of the year. And while there’s always the possibility that housing values will level off by the end of September, the trend line continues to project small but steady growth in the coming months.
2. Closing Prices: Another key development is the growing division between the prices that homes are listed for and what they end up closing for. In an environment where prices have peaked, you would expect for homes to generally sell for list price (or less). Conversely, if homes are closing above asking price, sellers are getting more money than they expected buyers to pay, which means that local prices probably haven’t peaked. In Alameda and Contra Costa County, the difference between list price and closing price has steadily widened over the past five months, culminating in the median August home selling for $60,000 above asking price. Such a significant divide would be highly unusual in an area where housing values have stopped climbing.
3. Inventory (and the factors that influence it): “Inventory” is a word that has been thrown around a lot in recent real estate news, and numerous attempts have been made to explain the Bay Area’s uncharacteristically low inventory. Some, including real estate executive Mark McLaughlin, believe it has a lot to do with high demand and short market times creating the appearance of low inventory. Others feel that homeowners are “riding the bubble” by refraining from selling until the market peaks, which leads to a lack of homes for sale.
Whatever the case may be, Alameda and Contra Costa County’s overall “months supply of inventory” has dropped back down to the year-low of 1.4. To clarify, this means that if no more homes were put up for sale, it would only take six weeks to sell all of the homes currently on the market. Such a low inventory gives homeowners considerable control over raising housing prices. And since August saw a drop in both the number of homes being put up for sale and the total number of homes for sale, this may continue to be the case for the foreseeable future.
Ultimately, it’s important to remember that the 2008-09 Recession hit much of the East Bay harder than other parts of the region, and that it has been on a slower path to recovery. This can explain why—while home values in other parts of the Bay Area have leveled off—Alameda and Contra Costa Counties still have room to grow. Will the area plateau? Most certainly. But will it be next week? Or next month? The current data suggests that this won’t be the case.
If you are thinking about taking advantage of current values by selling a home in the East Bay, you’ll want to talk to us here at Lifestyle Real Estate Services. We’ve always got our “ear to the ground” on the local housing market, and we’re eager to get started on building a strategy for selling your home that will guarantee maximum returns on your hard-earned equity. We believe that your home should be the “star” of the show—not our names or faces. That’s why we’re able to sell homes faster and for higher prices than the competition. So why wait? Let’s get started today!