Real Estate Roundup: Silicon Valley Home Prices Soar in the Fourth Quarter
Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.
HOME PRICES HIT NEW PEAKS IN TWO-THIRDS OF U.S. REAL ESTATE MARKETS
More than 90 percent of U.S. housing markets saw annual price growth in the fourth quarter, with the San Jose metropolitan area leading the country for appreciation.
That’s according to the National Association of Realtors’ latest quarterly report, which puts the median sales price for an existing U.S. single-family home at $247,800 in the fourth quarter, up 5.3 percent on an annual basis. Prices rose year over year in 92 percent of measured markets, and 64 percent reached new all-time highs in the fourth quarter.
Near-uniform price growth is the result of continually shrinking inventory conditions across the country. There were 1.48 million existing homes on the market at the end of the fourth quarter, down by 10.3 percent from the fourth quarter of 2016.
The Bay Area’s well-documented ultratight inventory conditions helped push prices up by double-digit percentage points in the region’s two largest cities. According to supplemental data published by NAR, the median home price in the San Jose metro area was $1.27 million, a year-over-year gain of 26.4 percent, making it both America’s most expensive and fastest-appreciating real estate market. As the nation’s second priciest housing market, San Francisco posted a fourth-quarter median sales price of $920,000, up by 10.8 percent on an annual basis.
TIRED OF LOSING A BIDDING WAR? TRY AN ESCALATION CLAUSE.
Bay Area house hunters are no stranger to fierce bidding wars, but a strategy called an escalation clause could potentially help those willing to take on a bit of a risk.
As The Wall Street Journal explains, an escalation clause is an addendum to a real estate contract that allows a potential homebuyer to set the maximum amount he or she will pay for a home in the event of multiple offers. The prospective homeowner can specify how much more they will pay for a property in incremental amounts to try to seal the deal, which could prevent them from overpaying and eliminate back-and-forth bids. The article notes that escalation clauses are currently common in highly competitive housing markets like San Francisco and Seattle.
But the strategy can be somewhat of a gamble for both buyers and sellers. Buyers run the risk of exposing their hands to competing bidders by disclosing the maximum amount they are willing to pay for a home. On the other hand, sellers risk leaving money on the table by not asking buyers for best-and-final offers.
U.S. HOUSING AFFORDABILITY TO FURTHER ERODE IN 2018, ECONOMIST PREDICTS
Real estate publications (including the Pacific Union blog), have written much on challenging affordability conditions both nationwide and here in the Bay Area, and alas for prospective homebuyers, the situation does not appear that it will improve in 2018.
Citing data from the National Association of Home Builders, a realtor.com blog post says that slightly less than 60 percent of new and existing U.S. homes were affordable for a household earning the median $68,000 annual income in the fourth quarter. That figure does not account for saving a 20 percent down payment, nor does it consider regional home price differences, such as expensive coastal markets like San Francisco and New York City.
According to NAHB Chief Economist Robert Dietz, home price appreciation and an expected increase in mortgage rates will conspire to reduce affordability for the remainder of the year.
“Buyers should be prepared,” Dietz told realtor.com. “It’s going to be more expensive to afford a house over the course of 2018.”