Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty. Written by Katie Hall.
The beginning of a new year is the perfect time to take stock and look at the state of the real estate market. To cut to the chase: based on the trends we witnessed in 2017, the 2018 residential market is positioned to continue on a steady path of growth, despite changes to the tax code and the unsettling political climate.
Steady growth with competition for single-family homes
The East Bay* has seen year over year growth for the past five years and has experienced little slowdown. Looking at the numbers, it’s easy to see why the consensus remains consistent among industry analysts: lack of inventory and continued demand is driving median pricing up higher each year, with properties closing, on average, in as quickly as three weeks.
Even with cash in hand, buyers in 2017 continued to compete for single-family homes facing multiple offers with properties selling an average of 12% higher than the original listing price.
Median sales prices for single-family homes in the East Bay show a continued climb, well over $800,000 for 2017, breaking median sales records for the first time in this part of the Bay. Demand remained high, as is evidenced by the increasing prices, despite the fact it was what is traditionally a quieter time in residential real estate. Typically the median sales price for single-family homes nationwide sees a dip in the fourth quarter. However, there’s been a consistent rise year over year in the East Bay, proving this is still one of the hottest real estate markets in the country.
Despite lack of inventory, the number of fourth-quarter sales of East Bay homes also finished the year strong with 1,622 closings, up almost 14% from the same period in 2016, and the strongest fourth quarter we’ve seen since 2012.
The question remains whether we’ll continue to see the pattern of inventory tightening, or whether this slight increase in the number of homes sold is indicative of the market to come.
Since 2012, the number of single-family homes sold in the East Bay has been on a steady 3-5% decline year over year — until this past year when the number of homes sold actually increased by 5% in 2017.
In Oakland (city-wide) premium single-family homes (priced in the top third of the market) fell as much as 25% in 2017, versus just 6% nationwide, revealing once again that inventory is not only scarce, but it’s scarce at specific levels, and that homeowners at the higher end of the market are staying put. Despite the year over year rise in median sales price, nothing broke the $6 million threshold in the East Bay (per public MLS data), even in Piedmont, traditionally one of the priciest neighborhoods locally.
What buyers are looking for
By now most homeowners and prospective buyers are aware of the major changes in the tax reform which caps mortgage interest deductions for homeowners at $750,000 (down from $1 million), and state and local tax deductions (SALT) at $10,000. Regardless, buyers are still out there looking for a place to move their families, and what seems to matter most to them right now is their time, especially as it relates to time spent commuting in traffic and/or remodeling their homes. Kitchens outdoor space matter more than ever: buyers want a finished kitchen and an accessible backyard. Space also remains a big draw, especially for those buyers coming from San Francisco who tend to compare pricing by square footage.
Overall, one of the biggest takeaways in the recent year-end numbers is that the East Bay remains a strong seller’s market for now, despite expected cyclical trends, with sales numbers continuing to climb each quarter. The industry will be keeping a close eye on 2018 to see whether the recent changes to the tax code will have an effect on local inventory and buyers’ behaviors. Most analysts believe, however, that even as we begin to see the new law taking effect, the likely impact will be a slow balancing between buyers and sellers, and not an abrupt shift in the overall market.
In this article the East Bay is defined as Albany, Berkeley, El Cerrito, Kensington, Oakland and Piedmont. Data Source: MLS
Home Truths is written and sponsored by Red Oak Realty, one of the largest independent real estate brokers in the East Bay, serving the community since 1976. Read more in this series. If you are interested in learning more about the local real estate market, or are considering buying or selling a home, contact Red Oak at hello@redoakrealty.com, tel: 510-250 8780.