Executive Summary:
- February Bay Area home sales posted a 6 percent decline from last year, with the largest decreases in San Mateo and Napa counties. But sales of home homes priced between $1 million and $3 million expanded from last February.
- The overall home sales decline is lower than the average 5 percent annual decline seen over the last four years.
- Inventory levels are lower than they were in February 2016, with all regions but Alameda County declining by 9 percent, on average.
- Buyer open-house traffic in Marin County, however, suggests that demand is picking up.
- The median home price appreciation across the Bay Area increased by 7 percent on an annual basis, with relatively stronger appreciation in Silicon Valley driven by an increase in luxury home sales.
Bay Area home sales slowed again in February, falling from both January and last February by about 2 percent. Nevertheless, compared with the monthly and year-over-year changes recorded in recent Februarys, the news is not all bad. While a 2 percent month-over-month decline in February is below the five-year average of a 4 percent increase, it is lower than last February’s 6 percent decline.
To recap the initial months of 2016, the volatility that shook the stock market early in the year contributed to a somewhat slower start for the housing market. At the same time, the 2 percent year-over-year decrease in February 2017 is lower than five-year, year-over-year average decline of 5 percent. Generally, the annual February declines recorded over the last four years have been slowing, which suggests a stabilizing market.
Also, total sales for the first two months of 2017 are only 1 percentage point lower than during the same period last year, with the lowest price range again showing the largest decline. Sales of homes priced above $1 million are actually 12 percent higher than last year. The reason that the lowest price range is dragging the overall decline is because it still comprises 72 percent of all Bay Area sales, down from 75 percent last February. And while all regions’ share of lowest price range declined from last year, Santa Clara and Alameda counties saw the largest such drops — 6 percent. Among the higher-priced ranges, February sales were 13 percent higher for homes priced between $1 million and $2 million; 28 percent higher for homes priced between $2 million and $3 million; and 13 percent lower for homes priced above $3 million. And while sales in the highest price range fell in February, they were still 10 percent higher year-to-date, with Silicon Valley and San Francisco responsible for most of the increase.
Continued inventory declines, down 9 percent from last year, also constrained February sales. Five out of eight Bay Area counties (excluding Solano) had double-digit percent supply declines since last February. Figure 1 illustrates year-over-year changes in home sales and for-sale inventory in February. Alameda is the only county with both improved sales and inventory activity from February 2016, while all others suffered. Santa Clara saw some pickup in home sales, largely stemming from sales of homes priced between $1 million and $2 million.
