Alameda Housing Market Update - September 2024
The Big Story Lower Prices and Lower Mortgage Rates Quick Take: Nationally, the monthly cost of financing a median-priced home was 8.3% lower in August 2024 than in June because the median home price declined 2.1% over the past two months, and mortgage rates have dropped. In August, the average 30-year mortgage rate declined for the third month to 6.35%, a 0.87% drop from the 2024 high reached in early May. The Fed is expected to cut rates by at least 0.25% in its September 17-18 meeting. Rate cuts will benefit the current market. Sales rose 1.3% month over month, ending a streak of four consecutive monthly declines, while inventory rose to its highest level since 2020. Because sales have been so sluggish this year, we may see sales increase in the fall, as rates fall and homes become more affordable. Note: You can find the charts & graphs for the Big Story at the end of the following section. *National Association of REALTORS® data is released two months behind, so we estimate the most recent month’s data when possible and appropriate. Affordability matters. Go figure! Despite low affordability through June 2024, affordability began improving in August 2024. The median U.S. home price reached a record high in June 2024, as did the monthly cost of financing a median-priced home, even though mortgage rates weren’t quite at their highest level this year. In other words, affordability hit a record low in June. Generally, prices tend to peak in June during any given year, even though the market veered away from this seasonality for a few years during the pandemic. It was no surprise, therefore, when prices declined slightly in July and August of this year. Additionally, during July and August, inflation lowered meaningfully, which means rate cuts. The anticipation of rate cuts alone led to lower rates in July and August. Over the past two months, the average 30-year mortgage rate fell 0.51%, which drastically improved affordability. A rough but decent shorthand calculation for mortgage rates is that every 0.10% increase or decrease to mortgage rates equates to roughly a 1% increase or decrease in the monthly mortgage cost. This means that, over the past two months, the monthly payments on homes became approximately 5% cheaper. Sales and inventory generally also decline in the second half of the year. However, this historical trend has broken over the past couple of years. Sales have been historically low since January 2023; so, even though new listings have also been depressed, inventory has grown to its highest level since 2020. At this moment, homebuyers have more choice than they’ve had in years. Higher supply, lower price, and lower interest rates caused sales to increase month over month, albeit only slightly — up 1.3%. Sales may continue to increase, however, because of the improving conditions, and sales levels are so low they almost have nowhere to go but up. The mid-September Fed meeting will likely bring about the first in a series of rate cuts, and the housing market may fare extremely well next year due to the timing of the cuts. The inventory build-up will likely slow for the rest of the year; but, since it’s already grown substantially, that isn’t concerning. We expect to enter 2025 with falling rates, high inventory, and seasonally lower home prices, which should create a perfect storm for a hotter spring market. We realize spring is a bit far; but, until then, we expect the sluggish market we’ve experienced over the past two years to persist, at least in terms of sales. The current market is favoring buyers, so if you’re thinking of buying, we can at least say that you have the most options to choose from. Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home. Big Story Data The Local Lowdown Quick Take: The median single-family home price fell 2.2% month over month, while condo prices declined 11.2%. We expect price contraction for the rest of the year, which is the seasonal norm. Total inventory fell 7.3% month over month, as sales outpaced new listings. We expect inventory to decline and the overall market to slow further as we make our way through the second half of the year. Months of Supply Inventory has declined month over month, indicating the market is improving for sellers. Currently, MSI remains under three months of supply for single-family homes, indicating it’s still a sellers’ market, while condo MSI continues to indicate a buyers’ market. Note: You can find the charts/graphs for the Local Lowdown at the end of this section. Median home prices declined month over month, which is the seasonal norm In Alameda, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from May 2022 to January 2023. Since January 2023, the median single-family home price has increased 23%, while condo prices have trended horizontally, increasing 3%. Year over year, however, the median price was up 27% in August for single-family homes and 32% for condos. Both single-family homes and condo prices peaked in May 2022 and are both 17% below peak currently. Prices are more likely to rise if more sellers come to the market. Inventory is so low that rising supply will only increase prices as buyers are better able to find the best match. More homes must come to the market to get anything close to a healthy market. That said, inventory, sales, and price typically peak in the first half of the year, so we expect contraction across those metrics for the rest of the year. Single-family home inventory is still low enough that it should create price support as supply declines in the second half of the year. High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6% much more than around 7%. Now that rates are declining, sales could get a little boost, but the housing market typically begins to slow as we make our way into fall. Sales, inventory, and new listings fell in August for single-family homes In August, home sales, inventory, and new listings declined slightly, which is normal for this time of year. Compared to this time last year, inventory has increased significantly, up 28%. Sales are up 2% for single-family homes, while condo sales fell 12%. Any amount of increasing inventory is good for the Alameda market. Inventory still has a long way to go before the market begins to become more balanced. When we take a longer look back and compare the supply of homes in August 2019 (pre-pandemic) to now, active listings have decreased by 40%. With that in mind, it should be no surprise that sales have declined by 34%. Total inventory has trended lower essentially since 2010, but active listings fell precipitously from July 2022 to December 2022, as sales outpaced new listings, before stabilizing to a degree from January 2023 to the present at a depressed level — still 24% lower than two years ago. Low inventory and new listings, coupled with high mortgage rates, have led to a substantial drop in sales and a generally slower housing market. Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. In 2023, sales and inventory didn’t resemble the typical seasonal peaks and valleys. It’s looking like 2024 inventory, sales, and new listings will follow historically seasonal patterns, albeit at a depressed level. It’s clear that supply will remain tight until spring 2025 at the earliest. Months of Supply Inventory in August 2024 indicated a sellers’ market for single-family homes and a buyers’ market for condos Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The Alameda housing market tends to favor sellers, which is reflected in its low MSI, especially for single-family homes. MSI has been below three months since July 2012 (2012 is not a typo!) for single-family homes. In 2024, MSI has risen meaningfully for condos. In August, condo MSI indicated a buyers’ market, while single-family home MSI still implied a strong sellers’ market. Local Lowdown Data
Alameda & Contra Costa - Housing Market Update August 2024
The Big Story Housing Market Seasonality vs. Expected Rate Cuts Quick Take: Nationally, home prices hit an all-time high in June 2024, and we estimate that prices may have bucked seasonal trends and climbed slightly higher in July.* In July, the average 30-year mortgage rate declined for the third month, falling to 6.78%, a 0.44% drop from the 2024 high reached in early May. The Fed is poised to start cutting rates in September, which tends to be around the time the housing market really slows before the holidays. Sales fell 5.4% month over month and year over year, while inventory rose to its highest level since 2020. The combination of rising prices and high interest rates has kept sales historically low. Although the market is shifting in buyers’ favor, we still expect sales to decline for the rest of the year. Note: You can find the charts & graphs for the Big Story at the end of the following section. *National Association of REALTORS® data is released two months behind, so we estimate the most recent month’s data when possible and appropriate. Rate cuts expected during slowest months in the housing market In June, prices rose for the fifth month in a row, reaching all-time highs. Typically, home prices begin to fall in July, but this year may be different. Currently, we estimate data to show that the national median home price rose very slightly in July. We are confident, at least, that prices have not fallen 5% from June to July, which means that July was the 13th consecutive month of year-over-year price growth. Despite the seasonal price dip, which is surely coming in the second half of the year, year-over-year price growth will almost certainly continue for months to come. So why won’t prices see a major shift downward in the second half of the year? Seasonal trends already dictate that prices will decline starting around now. Combine that with high mortgage rates, slowing sales, and the highest inventory in four years, and it seems like we have the perfect recipe for prices to fall significantly. While home prices tend to increase over time, the pandemic buying boom set the stage for prices to rise more quickly than expected, and to stay high. In a funny way, higher interest rates have been incentivizing higher prices due to the cost of selling and buying at the same time. From June 2019 to March 2022, the average 30-year mortgage rate was less than 4%, and the averages for all of 2020 and 2021 were 3.11% and 2.95%, respectively. All that to say, those buyers who purchased their homes through financing, as most buyers do, in 2020 or 2021, and who plan to buy their next homes through financing at a much higher rate — they need to sell their current homes for much higher to combat the cost of financing new ones. To further the point, the cost of financing the median home in June 2024 has increased 83% compared to June 2021, even though the sticker price of the median home is only up 16%. However, let’s say you bought the median home in June 2021 with 20% down, and then in June 2024, both sold your old median price home and bought the June 2024 median price home, your mortgage would only go up 55% rather than 83% because of the $60,000 price appreciation, which would bring you to ~30% equity in the new home. To be clear, 55% is still a lot, but it’s better than 83%. Overall, inventory growth is great news for the undersupplied U.S. housing market. According to data from realtor.com, inventory reached its highest level since June 2020. The increasing inventory level should cause rising home prices to slow. In the pre-pandemic seasonal trends, sales, new listings, inventory, and price would roughly all rise in the first half of the year and decline in the second half of the year. Sales and new listings have been far lower than usual since mortgage rates started climbing, which is to be expected. Because we don’t anticipate sales to pick up until the spring of 2025, inventory could easily continue to grow in the second half of the year. Fed rate cuts will come right when the market really starts to slow down, so they probably won’t drive the market into a buying frenzy in the fourth quarter. Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home. Big Story Data The Local Lowdown Quick Take: Median home prices are slightly below peak levels across the East Bay. We expected price contraction after peaking in the second quarter, which is the seasonal norm. Prices will likely decline for the rest of the year. Total sales in the East Bay rose 3.0% month over month, highlighting the high demand. Homes coming under contract rose significantly as well, up 4.9%, indicating that sales may increase again in August. Months of Supply Inventory still indicates a sellers’ market in the East Bay for single-family homes, but for condos, MSI implies the market is more balanced. Note: You can find the charts/graphs for the Local Lowdown at the end of this section. The median single-family home price in Contra Costa is near an all-time high In the East Bay, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates. Prices in the East Bay generally haven’t experienced larger drops due to higher mortgage rates, and as mentioned in the Big Story, higher mortgage rates are contributing to prices staying high. Year to date, in July, the median single-family home and condo prices rose across the East Bay. Year over year, prices increased most significantly for single-family homes, up 2%. Prices typically peak in the summer months, so we don’t expect new all-time highs for the rest of this year. However, we do expect some minor price contraction in the coming months. Additionally, demand is high enough that it will create price support as supply declines in the second half of the year. High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6%. Now that rates are declining again, sales could get a little boost, but the housing market typically begins to slow this time of year. Sales and inventory rose, while new listings fell month over month The 2024 housing market has looked progressively healthier with each passing month. We’re far enough into the year to know that inventory levels are about as good as we could’ve hoped, although single-family home inventory is still lower than we would like. In 2023, single-family home and condo inventory followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings slowed the market considerably last year. Even though sales volume this year was similar to last, far more new listings have come to the market, which has allowed inventory to grow. Condo inventory even reached a two-year high in July. However, for single-family homes, even though inventory is up 32% year over year, it’s still 20% lower than it was two years ago. Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. It’s looking like 2024 inventory, sales, and new listings will resemble historically seasonal patterns, and at more normal levels than last year. Now that we’re more than halfway through the year, we expect inventory, sales, and new listings to decline through the rest of the year. Months of Supply Inventory in July 2024 indicated a sellers’ market for single-family homes and a balanced market for condos Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The East Bay market tends to favor sellers, which is reflected in its low MSI. MSI trended higher in the second half of 2023, moving above three months of supply for condos. From January to April 2024, however, the East Bay MSI fell significantly before rising in May and June. MSI then dipped in July, and it currently implies that the single-family home market favors sellers, while the condo market is more balanced. Local Lowdown Data
Alameda & Contra Costa - Housing Market Update June 2024
The Big Story Median home price hits record high for the second month Quick Take: Since January 2024, prices have climbed 13.6%, reaching an all-time high in May and another in June 2024. Similarly, the monthly cost of financing has hit a record high, meaning that home affordability is at a record low. In June, the average 30-year mortgage rate declined to 6.86%, dropping 0.17% from the 2024 high reached in April. The Fed may cut rates as early as September, but the magnitude of the cut will be small, likely 0.25% this year. Currently, we expect rates to remain between 6% and 8% for the rest of 2024. Sales fell 0.7% month over month, while inventory rose 6.7%. The combination of rising prices and high interest rates has kept sales historically low. Since January 2023, sales have trended more horizontally, although we expect sales to decline until spring 2025. Note: You can find the charts & graphs for the Big Story at the end of the following section. Surprisingly unsurprising: high rates, high prices, high inventory In June, prices rose for the fifth month in a row, peaking at an all-time high in June 2024. This also marks the 12th consecutive month of year-over-year price growth. According to typical seasonality, the median price peaks in June, so we expect prices to decline starting in July. Over time, prices generally move much higher in the first half of the year than they decline in the second half; you can think of it as two steps forward and one step back, year after year. Last year, for example, prices rose 13.7% from January 2023 to June 2023, then fell 7.7% from June 2024 to January 2024, which was still a year-over-year gain of 4.9%. This year will likely look similar, although we don’t think that prices will decline as much in the second half of 2024 as they did in 2023, especially if the Fed cuts rates in the fall. Even a minor rate cut, like the expected 0.25%, could significantly affect mortgage rates, as it would signal the beginning of more and more cuts. For the moment though, we are starting summer with a combination of elevated mortgage rates and record high prices, which have brought affordability to an all-time low. Low affordability has resulted in fewer sales and growing inventory. Demand is still high relative to supply, even though inventory is building. We know that demand is still high because buyers are still buying at peak prices. From a historical context, we should’ve expected this to happen. We took a look at data from the 1980s to see how much home prices appreciated during a decade-long period of the highest mortgage rates in history. From January 1, 1980, to January 1, 1990, the 30-year mortgage rate ranged from 9.03% to 18.63%, with an average rate of 12.71%. Although home prices didn’t increase dramatically like they have in the recent past, inflation-adjusted home prices still increased about 8% during that decade. Today, with the strong U.S. economy, it was never very likely for home prices to stagnate or decline due to higher mortgage rates. However, high rates have slowed sales volume considerably, which has caused inventory to grow. Overall, inventory growth is great news for the undersupplied U.S. housing market. According to data from the National Association of REALTORS® (NAR), inventory reached its highest level since August 2022. The market is still broadly undersupplied, but the increasing inventory level should cause rising home prices to slow. In the pre-pandemic seasonal trends, sales, new listings, inventory, and price would roughly all rise in the first half of the year and decline in the second half of the year. Sales and new listings have been far lower than usual since mortgage rates started climbing, which is to be expected. Because we don’t anticipate sales to pick up until the spring of 2025, inventory could continue to grow in the second half of the year. Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home. Big Story Data The Local Lowdown Quick Take: Median home prices are slightly below peak levels across the East Bay. We expect prices across most of the East Bay to continue rising in July, though they will likely remain slightly below the record highs. Active listings rose, but sales and new listings declined in the East Bay month over month. We expect inventory to increase into July and August and return to a more normal market after the slowdown experienced over the past year and a half. Months of Supply Inventory still indicates a sellers’ market in the East Bay for single-family homes, but for condos, MSI shows a shift from favoring sellers to buyers. Note: You can find the charts/graphs for the Local Lowdown at the end of this section. Median prices declined month over month in the East Bay except for Contra Costa condos In the East Bay, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates, and prices generally haven’t experienced larger drops due to higher mortgage rates. Month over month, in June, the median single-family home price fell 2% in Alameda and 3% in Contra Costa. Year over year, prices were up 4% in Alameda and down 2% in Contra Costa. Condo prices fell in Alameda but rose in Contra Costa from May to June. We expect prices in the East Bay to remain slightly below peak this year, although new highs are possible in July 2024. Additionally, inventory is low enough that it will create price support as supply declines in the second half of the year. High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates above 6%. Now that rates are near 7% again, sales are slowing during the time of the year when sales tend to be at their highest. This phenomenon isn’t great for the market, but it isn’t terrible, either, as it may allow inventory to build in a massively undersupplied market. Inventory rose for the sixth month in a row, while sales and new listings declined Since the start of 2023, single-family home inventory has followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings have slowed the market considerably. Typically, inventory peaks in July or August and declines through December or January, but the lack of new listings prevented meaningful inventory growth. Last year, new listings and sales peaked in May, while inventory peaked in October. New listings have been exceptionally low, so the little inventory growth in 2023 was driven by softening demand. In December 2023, inventory and sales dropped, but more new listings have come to the market in 2024, which has driven the significant increase in both inventory and sales so far this year. The market looks far healthier than last year, and we expect the market to slow in the coming months — the seasonal norm. With the current inventory levels, the number of new listings coming to market is a significant predictor of sales. New listings fell 14% month over month, and sales followed suit, declining 12%. Year over year, inventory is up 33%. Months of Supply Inventory rose in June 2024, indicating a shift in favor of buyers Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The East Bay market tends to favor sellers, which is reflected in its low MSI. MSI trended higher in the second half of 2023, moving above three months of supply for condos. From January to April 2024, however, the East Bay MSI fell significantly before rising slightly in May and June. The single-family home market favors sellers still, but the condo market moved from favoring sellers to buyers. 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