San Francisco Bay Area home prices are slowing and rents are going up, an indication that the housing market has entered a post-boom era in which buying a home no longer guarantees a profit.
Home prices inched to another record in June, but sales ebbed further and rents around the region have jumped by their largest margin in several years. All this suggests wary consumers are being pushed out of the purchase market and into rentals by stratospheric prices and rising interest rates.
“A few more people are hitting the affordability wall,” said Ron Gable, vice president and manager of Alain Pinel Realtors in Half Moon Bay and San Mateo. “And more people are feeling they’ve seen the [price] peak for the near term and they want to buy at the bottom and sell at the top.”
After years of heading in wildly divergent directions, the two halves of the housing market–purchase and rental–appear to be moving back into alignment.
“There should be a more accurate relationship between the value of a house and the value of the apartment market,” said Caroline Latham, chief executive of RealFacts, a Novato firm that releases a quarterly snapshot of the apartment market. “I expect to see rental prices continue to go up for a while, and we’ll probably see housing prices stagnate or go down.”
Last month, the median price for a single-family home in the nine-county region hit $689,000, up about 7 percent from the year-ago median of $644,000, according to real estate information firm DataQuick. While that figure set a record for the third month in a row, the annual rate of appreciation has slowed markedly since early last year.
In addition, sales transactions slid for the 15th month in a row. A total of 9,892 houses and condos changed hands, down about 24 percent from June 2005.
Gable said his firm sees far fewer multiple offers on properties–about 30 percent of homes draw more than one bid, compared with about 90 percent a year ago. What’s more, the inventory of unsold homes has leaped from a six- to 12-week supply in the past year, according to the California Association of Realtors.
In several markets, prices dipped slightly. For instance, the median price for a detached home in Napa County dropped 1.6 percent in the past year, from $599,000 to $589,000, DataQuick found. Condo prices in San Mateo remained flat at $535,000.
DataQuick’s monthly reports are based on filings with county recorders’ offices and represent sales initiated 30 to 60 days earlier.
While Gable said sellers of existing homes must trick out their abodes with fancy staging and fresh landscaping to ensure a speedy sale, sellers of some new homes find they must offer even more tantalizing incentives.
But from Sunnyvale to Walnut Creek, apartment shoppers are finding rental properties are harder to come by–and more expensive.
The average for a one-bedroom apartment in the Bay Area climbed nearly 7 percent, to $1,218, according to a quarterly report by RealFacts. In Silicon Valley, where the fallout from the dot-com blowout drove rents down by about 30 percent, the average rent ticked up 9 percent to $1,259 amid a strengthening economy and improving corporate profits.
The average mortgage payment Bay Area buyers committed to paying in June was $3,183, DataQuick said.
RealFacts’ quarterly reports, which cover more than 1,200 apartment buildings and 215,300 units in the nine-county region, are based on surveys of properties of 50 or more units. In San Francisco, much of the rental stock consists of smaller buildings of four or six units.
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Research by other firms, however, also shows that rents in San Francisco have been rising.
There were also some higher-than-average increases on the purchase side. In places such as Marin County, the median for a middle-of-the-road house stands at nearly $1 million–$971,500.