In many ways, Q4 2016 was a tale of two halves. The buyer holdout that stretched into mid-November was countered by major action in San Francisco, the Mid-Peninsula and Alameda County—all beneficiaries of pent-up demand caused by the market’s uncertainty regarding the election. As such, a year marked by increased stability in both sales prices and sales volume witnessed a streak of dramatic behavior more in line with what we’d witnessed in previous years. However, once the dust settled a strong and stable market emerged. And so did some valuable insight toward early-2017 market activity.
A main story this quarter was the massive movement in the upper-end of the San Francisco and Mid-Peninsula markets. When the economy regulated in the wake of the elections, a noticeable amount of high-seven-figure and eight-figures homes that had been on the market for months were finally absorbed. This activity helped San Francisco to a record quarterly average sales price of $1.833 million, and San Mateo County to its second-highest-ever average sales price of $1.66 million. San Francisco also posted a staggering 25 percent year-over-year gain in its luxury sector—defined by the top ten percent of sales in an area.
While these numbers were certainly impressive, there were plenty of signs in more affordably priced areas like Contra Costa, Alameda and Napa Counties that should motivate buyers to move at a quicker pace. Napa County, in particular, saw its average sales price down 13 percent and its total sales volume up by the same margin. While a swing that heavily in favor of buyers shouldn’t last long, it is a signal of a lower-end market that is expected to deliver an influx of new inventory in early 2017.
We can also look to reports regarding increased wage growth and continued strong indicators in the tech sector to help support an active real estate market. To this end, California Association of REALTORS® Vice President and Chief Economist, Leslie Appleton-Young recently said, “With the California economy continuing to outperform the nation, the demand for housing will remain robust even with supply and affordability constraints still very much in evidence. The net result will be California’s housing market posting a modest increase in 2017.”
Even modest sales growth in 2017 would be a boon to an area that saw six of its seven counties’ sales volume dip due to limited inventory for the fiscal year of 2016. And when one factors in that sales prices are not expected to climb by more than a few percentage points on the year, market health looks even more stable. After all, an easing in the rate of appreciation also signals a more balanced market that allows buyers and sellers to perform due diligence, giving both a strong voice at the negotiating table.