Fearful February Hits Bay Area Housing Market?
Election politics were in full swing, the stock market had one of the worst weeks in its history followed by one of the best days in the same history. The mortgage interest rates dropped to the lowest level since 2012, North Korea fired two missiles, and lack of understanding of corona virus added to the feel of global mayhem even though there is far fewer known cases of corona virus so far than cases of the flu in a typical flu season. It does not look like the real estate market was paying attention to any of this. The median home sale price grew by 9.1 percent comparing with February of 2019, the number of homes available for sale in Santa Clara and San Mateo counties dropped by whooping 42.5 percent and the median time to sell went down to 10 days, the fastest pace of sales since June of 2018.
The price push in the upward direction was fueled by return to the low mortgage interest rates and yet another reduction in the number of homes available for purchase. This round of tight supply started in July of 2019 when the rate of sale started outpacing the rate of new listings. As the result the number of homes available for sale dropped from 3,468 at the end June of last year to just 1,402 at the end of February 2020 in our two counties. While the number of homes that were put on the market this February was slightly higher than last year, an increase of only 2 percent, the number of accepted contracts grew by 10.3 percent continuing the pattern established last year.
With half of the houses selling in 10 days or less (in Palo Alto median time to sell a home was only 7 days) the buyers should go see properties as soon as they hit the market and be ready to make fast decisions. You need a team that can act fast: we will help you assemble a team of professionals from lenders to contractors to support you in your house hunting journey.
The average overbid, the sale price to the list price ratio, grew to the highest level since September of 2018. At 103.7 percent it is an indicator of the increased level of competition for the available homes. The open houses are very busy, and there are multiple reports of 200 or more people coming through an open house in a single weekend.
The seemingly unquenchable thirst for homes is just one side of the current housing crunch. The other side is the supply. After a long period of real estate value growth many homeowners accumulated a significant equity. They are being held in place and are being prevented from selling by two tax considerations. The first one is the capital gain tax. Some homeowners may face a tax bill in hundreds of thousands of dollars in combined federal and state liability. Make sure to talk to your CPA prior to putting your house on the market to evaluate the potential impact of your plans. We can also refer you to local professionals who can help you understand the potential tax consequences of selling your home. The second reason are property taxes. Prop 13 limits the property tax increases to 2 percent a year. Because of the fast property value growth moving to a new home may leave the sellers with a much higher tax bill even when they are downsizing.
Before you make any big and costly decisions about your real estate needs, let’s have a conversation. Let’s find out how we can make present market conditions work for you!
-Elena & Michael Talis