No Cooling Effect for Bay Area Home Prices in Q1 2018
For anyone who thought that Q1’s winter months may have had a cooling effect on housing prices in the Bay Area, now is the time to think again. The average sales price rose year-over-year in all seven counties this quarter — with the Mid-Peninsula, San Francisco, and North Bay posting 10-year record highs in terms of price point. At $1.074 million, the Bay Area’s overall regional average sales price was a 10 percent gain over last year’s first quarter average.
The narrative hasn't changed all that much from last year as continued high demand, low inventory levels, and strong economic conditions for the region continues to push prices up in several markets. Furthermore, the uncertainty we saw last year prior to the new tax plan being passed started to lessen as 2018 got underway, with sellers having a better understanding of what to expect under the current tax scenario and feeling more confident in the market. In March the Mercury News published an article with the headline, "Bay Area job market 'defies gravity,' economists say," in response to a presentation given by William Yu and Jerry Nickelsburg of the UCLA Anderson Forecast. "The Bay Area job market will outperform the nation during 2018, but skyrocketing housing prices might imperil the region’s economy," said Yu and Nickelsburg.
A total of 6,466 homes sold in the Bay Area during Q1 2018, up 3 percent from Q1 2017 and down 30 percent from Q4 2017. Seeing such a large drop in quarter-over-quarter sales volume between the end of one year and the start of the next however isn’t all that uncommon in the Bay Area given that Q1 tends to be reflective of what went into contract in November and December.
As we move into Q2’s busier spring selling season, we anticipate more activity in the upper-end of the luxury market for San Francisco and the Mid-Peninsula. In San Francisco for example, where the luxury floor is at $5 million, there’s very little inventory available in the $5-8 million range and therefore may entice buyers in that category to consider properties at the $10-15 million mark if it means finding a home that offers everything they’re looking for. The economic growth of the Bay Area is expected to remain on course with current trends as we get closer to the halfway mark of 2018 — and in turn will likely continue to drive high buyer demand, absorption rates, and prices for a very active spring market.
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