The Bay Area housing market continued to improve as property investment location in 2012. The area enjoyed strong sales and rising sale prices fueled by increased demand, strained inventory, record-low mortgage rates and robust investor interest. The market’s performance in November reflects the improved performance. A total of 7,296 new and resale homes were sold in the nine-county Bay Area in this month and was the highest for any November since 8,042 homes were sold in 2006.
‘With the mismatch between supply and demand, there’s upward pressure on prices,’ said John Walsh, president of real estate information company DataQuick
The median price paid for a home in the Bay Area was $438,000 in November 2012. That was up 5.3% from $416,000 in October and up 20.5% from $363,500 in November 2011. The November 2012 median price was the highest since August 2008, when it was $447,000. Inventory is declining, and in particular the amount of distressed property, which undermines property prices, is falling. In November distressed property sales – the combination of foreclosure resales and “short sales” – made up 35.0 % of the resale market. That was down from 35.2% in October and down from 50.1% in November 2011.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 11.5% of resales in November 2012, down from 11.7 % in October, and down from 25.2% in November 2011. The level of foreclosure sales in November 2012 was the lowest since 10.1% in November 2007 ie before the property crash and well below the peak level of 52.0% in February 2009. The long term average for foreclosure resales over the past 17 years is about 10% and so the level is now almost back to this ‘normal’ proportion.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 23.0 % of Bay Area resales in November 2012. That was down from an estimated 23.5% percent in October 2012 and down from 24.9 % a year earlier. Investment buyers, many from overseas, continue to be active in the Bay Area market and in November purchased 24.4% of all Bay Area homes, up from 23.7 % in October, and up from 21.7% a year ago. For investors looking for good rental returns and capital growth the San Francisco Bay area may be the ideal property investment location.
