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Bay Area home prices continue double-digit gains on historic streak

Louis Hansen, The Mercury News on

Published in Home and Consumer News

SAN JOSE, Calif. -- Tight housing supply pushed Bay Area home prices higher yet again in December, extending year-over-year, double-digit gains for the fifth straight month -- and overall gains to an historic 69 straight months.

The median sales price for a single-family home in the nine-county region rose to $765,000 in December, up 13.8 percent from last year, according to real estate firm CoreLogic.

The latest data continues a Bay Area housing narrative now stretching toward six years -- a rollicking market great for property owners but punishing to newcomers and middle-income families hoping to buy.

"We still have an inventory-starved market where demand is outpacing supply," said Andrew LePage, analyst with CoreLogic. "It's bad news for first-time buyers and others looking for a foothold."

LePage said the robust market is similar to the streak of rising Bay Area home prices between December 2001 and November 2007. The region also saw steady, year-to-year growth in housing prices through the late 90s.

Single-family home sale prices in Santa Clara County raced up 35 percent during the last year, reaching $1.17 million in December. San Mateo County closed the year with a 17.6 percent gain in sales prices to $1.36 million. Bargain hunters in Alameda County drove up prices 16.8 percent to $800,000.

Four of the nine counties ended the year with median sale prices topping $1 million. Buyers on a tight budget saw home costs escalate year over year in the counties of Contra Costa, up 8.9 percent to $542,000; Sonoma, up 15 percent to $632,000; and Solano, up 6.4 percent to $400,000.

The escalating prices also meant fewer home sales, with many residents unable or unwilling to wade into one of the most expensive markets in the country. The limited supply of single-family houses drove down December sales year over year, from 4,777 to 4,721 homes, a dip of 1.2 percent, according to CoreLogic.

The inventory of entry-level homes has been low, LePage said, and many buyers are focused on that segment.

Seasonal slowdowns and more sales of lower-cost, starter homes drove December's median price down from a record $825,000 in November.

"We have no inventory and lots of demand. It's simple economics," said Gustavo Gonzalez, broker with Valley View Properties in San Jose. "This isn't going to go away unless we build substantially more housing."

Gonzalez is a veteran broker from the dot-com years, when valley real estate prices ran up with inflated company values that ended in a bust. He thinks it's different this time around.

"These are real companies, with real numbers behind them," he said. "Google isn't going anywhere."

 

The report also found absentee buyers more interested in the valley -- roughly 18 percent of purchases went to investors and second-home buyers, above the historic rate of 15 percent.

William Doerlich of Realty One Group in San Ramon said he's been receiving more interest from individual investors looking to get into the market. Despite high prices and fierce competition, he said, his clients see value in single family homes, small apartment buildings and condos.

Bay Area properties can yield both strong cash flows and appreciation, he said. "The market is still looking at real estate as a good investment," he said.

The booming Bay Area economy created about 367,000 jobs while building just 57,000 new homes between 2010 and 2015, according to the Silicon Valley Leadership Group. The impact is clear -- the new Apple spaceship headquarters helped drive home prices up double digits in nearby Cupertino and Sunnyvale.

Major tech companies continue to expand, bringing well-paid engineers and professionals to the region.

That formula has kept agents busy and buyers anxious. All-cash deals and offers without contingencies are not uncommon, agents say.

Gonzalez tells first-time buyers to be patient. One couple he's working with is hoping to close on Friday -- after five months of searching and making a bid $100,000 over the asking price for a two-bedroom, one bathroom home in San Jose.

He offered them one more piece of advice: "Pray to God that we get selected."

(c)2018 The Mercury News (San Jose, Calif.)

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