Just when it appeared that the Bay Area housing market was on a slow road to recovery, home sales took a disheartening dip in October, logging the second-slowest pace for the month in more than two decades.
Experts pointed to a number of possible explanations: lingering effects from the government’s now-defunct homebuyer tax breaks, a lack of consumer confidence and stubborn concerns about job security that’s leaving potential purchasers gun-shy.
In Santa Clara County, October sales of single-family homes plummeted year over year by 27.3 percent, from 1,303 to 947, according to MDA DataQuick of San Diego. And while the median price of a home in the county inched up 2.3 percent to $562,500, that was the smallest
rise since fall 2009, indicating that once-climbing prices are flattening out.
In San Mateo County, sales dropped 3.5 percent, from 451 to 435, while the median price fell nearly 6 percent to $592,500.
In perhaps the cruelest twist, the sales drop came despite record-low mortgage rates. “Here we are with these ridiculously low rates and people aren’t scrambling after them,” said San Jose mortgage broker Cathy Warshawsky. And they’re not scrambling, she says, because they’re scared.
“I think people are petrified they’re going to lose their jobs or they’re just sitting tight because they don’t believe we’re out of this recession yet,” she said.
To make matters worse, said San Mateo real estate agent Jeff Fraley, “buyers
are still having challenges getting qualified, and once they’re in contract, the lender will often throw up roadblocks to make everybody sweat. They want to be 100 percent sure they’re making a good loan, but a lot of sales are getting derailed at the last minute.”
While there are pockets throughout the region faring better than others, the Bay Area overall showed a sobering drop in October, with a total of 6,122 new and resale houses and condos closing escrow in the nine-county area, down
3.3 percent from the month earlier and 22.8 percent from October 2009. That gave the month the dubious distinction of having the lowest number of sales for October since 2007 and the second lowest since 1988, when DataQuick started gathering statistics.
In the process, the Bay Area’s sales broke a 12-month string of year-over-year gains in the median price. Last month’s year-over-year decline was the first since the median fell 8.8 percent, to $365,000, in September 2009. Santa Clara and Solano were the only counties in the area to show price gains.
“Part of what we’re seeing is the hangover effect from the expired homebuyer tax credits, which spurred many to buy in the first half of the year,” said MDA DataQuick President John
Walsh. “But that effect is fading. Now the real hurdles to more normal sales levels are the lack of meaningful job growth and the concerns many potential buyers have about job security and the overall economy. It’s why ultralow mortgage rates, alone, haven’t turned things around.”
“To really jump-start the market,” Walsh said, “it’ll probably take a combination of at least the current level of affordability, a brighter economic outlook and improved access to credit.”
There are some, like Silicon Valley builder Jim Hardcastle, who see a silver lining in the home-sales numbers. While inventory dropped a bit from a year earlier, with the number of single-family homes listed in Santa Clara County down 11 percent from October
2009, historically low mortgage rates remain a powerful lure “for people here in the Bay Area who still have a lot of money sitting around,” said Hardcastle, vice president of Nexgen Builders in East Palo Alto. “You just have to give them a good reason to spend it,” he added.
“We’re now building four houses in Willow Glen, and while these same homes would have sold in 2006 for $2.2 million, we’ll be asking $1.4 to $1.5 million and they’ll go quickly,” he said.
Rick Turley, president of Coldwell Banker’s Bay Area residential brokerage division, said the disappointing numbers don’t tell the whole story.
“If you look at the consumer confidence level, we were at the lowest point in June and July, and those are the months that
sales would have happened to end up as the closings in the DataQuick report,” he said. “I can tell you the energy in our offices is far stronger today than it was in mid- to late summer.”
Contact Patrick May at 408-920-5689.