Despite Inventory Shortage, Q1 2017 Shows Signs of Market Health
At a time when limited inventory and skyrocketing prices have become the norm, Q1 2017 exhibited healthy enough activity to both satisfy sellers and also provide prospective buyers with a bit of optimism. The two main themes this quarter were steady average sales price growth and a slight bump in overall sales volume from the shortcomings witnessed in Q1 2015 and Q1 2016.
In relation to sales prices, steady is a key word here: The double-digit percentage hikes that have become commonplace in the Bay Area over the past few years were replaced by a healthier 5 percent overall average sales price gain from Q1 2016. While this number should remain encouraging to sellers, it should also give buyers the perspective that if they can successfully navigate the still-depleted market, they generally won’t be doing so at a time of astronomical price increases. It also comes as a welcome buyer sign that this increase was below the 7.5 percent median list price increase reported nationwide in March.
As for the lingering inventory concerns, there’s no denying that availability will continue to factor heavily into market navigation and list prices for the foreseeable future. That said, the 6,260 homes sold this quarter across all seven counties was a subtle-but-encouraging 4 percent year-over-year increase. This activity included more affordable areas like Napa County experiencing its highest Q1 sales volume since 2012 and Alameda and Contra Costa Counties up 5 percent and 7 percent in year-over-year sales volume, respectively. The East Bay luxury sector—as defined by the top 10 percent of homes sold—also saw massive sales volume growth, to the tune of a 66 percent gain year-over-year.
As we look toward Q2, a healthy and finally (somewhat) stabilized market should bring more sellers out of the woodwork. Buyers will still have to contend with strong competition and quickening turnover rates. That said, the CALIFORNIA ASSOCIATION OF REALTORS® estimate of a 4.3 percent increase on state median sales price gains for 2017—spelling the lowest forecasted gains in six years—seems reasonable, as does its projection of a modest increase in overall sales.
Buyers should also be enthused that the market looks to remain hot—as opposed to blazing—as ongoing growth speaks to a confident return on investment. Lastly, they shouldn’t be intimidated by huge list prices, as sellers are often vastly overshooting (see: the 14 percent loss on list price for sellers who tested the Q1 2017 Mid-Peninsula market). As for sellers, they can simply continue to ride the wave of the most desirable major market in the nation.