2017 MARIN MARKET UPDATE
I think everyone can agree that 2018 is being met with more hope, optimism and eagerness than any year in recent past. 2017 is over and it seems we’re all just fine with that. Sure, the economy improved and consumer confidence is on a high. Sure, the real estate market continued to show strength. And, sure, we’re all still here, but man … from natural disasters, to chaotic global (and local) politics, to unspeakable violence … 2017 shook us all up a bit, so it’s no wonder we bid it a fond adieu!
Ever optimistic however, we look to 2018 with a renewed energy – a blank slate if you will. An opportunity for positivity and a chance to get it right and make good things happen. I subscribe to that hope. 2018 is going to be a great year!
“A strengthening economy, healthy consumer balance sheets,and low mortgage interest rates are supporting the continued strong demand for residential real estate.”
-Frank Martell, President & CEO of CoreLogic
Despite the events of 2018, our economy is going strong with unemployment at a 17-year low. The Bay Area continues to be buoyed by a strong tech industry, while much of the country is only now just experiencing the positive effects of a rebounding economy. A healthy Bay Area economy means more jobs, more demand on consumer services, more need for housing at all levels, more traffic, more commuting, more of everything! But, while all of this abundance continued rising this past year, we believe this next year we will start to see more balance in many areas – more of an adjustment to our new reality and a settling in, if you will, to our current individual living situations.
The median price for Marin homes in 2017 was $1,075,000, up about 8.41% from the 2016 median of $991,600. The median price is the half-way point of the market – meaning half of the homes sold were above the median, and half below. This tends to be the more accurate indicator of the overall market, more so than the average sales price.
The average sales price is calculated by adding all the sale prices for all homes sold in Marin during the year and then dividing that total by the number of properties sold. These numbers can often be skewed by a few high-end sales which push the average higher than the median. The average sales price for all properties (including condominiums) in Marin for 2017 was $1,395,966 as compared with $1,285,321 in 2016, up about 8%. The chart below is the average price for single family homes only.
As you can see by the chart below, we were on trend with previous years’ ups and downs, though we started to see a major shift in October, November and December with a surge of home sales which ended the year in a strong position moving into 2018.
Of major consequence for this year will be how the Tax Cuts and Jobs Act, which just passed in December, will affect us here in California. The Bay Area, in particular, may be hit disproportionately hard. While many will see a reduction in their income taxes, the reform package caps mortgage interest deductions for primary and secondary residences at a loan value of $750,000 down from $1 million dollars, while capping state and local tax deductions (SALT) at $10,000 (no current cap now) which is pretty low as far as annual homeowner taxes go in California.
We are still monitoring the latest tax legislation and its effects on our real estate market here in Marin, but we do expect to see California respond to the new tax provisions by seeking new state and local legislation that may ease the blow a bit. We are watching interest gain in a statewide initiative for a one-time transfer of your current tax base to any county in the state – a one-time tax incentive (prop 60 and 90) is currently restricted to only a few counties right now, or within the county in which you currently reside. This kind of legislation could be exactly what California needs to allow those who can’t afford to move because of a new, higher tax base to have a little more flexibility in where they live. This will be a big benefit to boomers who are ready to downsize and retire to more affordable communities, making room for the Millennials who are eager for the vacancies that this kind of legislation would surely generate.
Millennials are entering into the housing market in droves now as they start families of their own. For us in the burbs this means a move North in search of a less hectic and more balanced life. Watch out Marin… the Millennials are coming!
Consumer confidence is peaking, entering into its fifth month of increases and reaching a 17-year high. Recent gains in the stock market help consumer confidence, as do tax cuts and the increase of disposable income.
As far as interest rates go, we are starting to see them rise a bit. Experts predict they will inch above the current average of 3.9% and probably land somewhere around the 4.5% level and likely not exceed 5% in 2018 for a conventional 30-year fixed rate mortgage. Still not bad for anyone who remembers rates skyrocketing back in the 80s!
Inventory will continue to be an issue here in Marin… it always is. There just aren’t enough homes to meet consumer demand and that’s why Marin continues to hold its value year after year. It’s not that we have slow growth here in Marin, it’s that we pretty much have no growth. The number of new single-family homes is staggeringly small. Still, many homeowners may see 2018 as a good time to sell, upgrade, downgrade or simply move away. It’s the moving elsewhere part that scares most sellers though… sure they can sell their home for a nice price, but where will they move?
While new housing starts are up across the country, not so much in Marin. Still, the overall increase in housing could provide some much-needed relief in the Bay Area, which could, in turn, help our inventory shortage here in the North Bay. Of course, the laws of supply and demand are still at work. The fewer the homes, the higher the price. If inventory increases in the Bay Area, we may see some price decreases regionally, but we’re not expecting those to be too dramatic. The pressure for inventory is definitely at the entry level in Marin (and really for all of the Bay Area) – those homes ranging in price from $700,000 to $1.3 million. Unfortunately, there are a lot of luxury condos being built, but not so many single-family homes in the price ranges most appealing to today’s entry level buyers.
The economy and housing market will continue to grow as metro markets, including the Bay Area, wrestle with the affordability issue – how high can prices go before everyone is priced out of the market? Stay tuned!
Home renovation services will remain in high demand. The fires in the North Bay have taxed the flow of services coming into Marin – most of those service providers coming in from Sonoma and Napa County. Builders, plumbers, roofers, contractors, electricians, designers, etc., are all being stretched. Building materials are also being snatched up as soon as they hit the shelves, so a steady flow of those supplies will be needed to keep prices in check. Sadly, we’re competing nationally with flood and hurricane ravaged areas who will also continue to rebuild into 2018. Good news for building supply manufacturers!
SOLD IN MARIN — 2017/2016
An interesting way to look at the Marin market is to further break down the categories of each town. The “ultra-luxury” markets of Belvedere and Ross for instance, each saw about the same amount of sales (Belvedere down three and Ross up five), but both decreased in median price just slightly. In the neighboring towns of Kentfield and Tiburon, which we still consider “luxury”, the number of sales spiked in Tiburon with 20 more home selling and a 26.15% price increase, while Kentfield added just one sale, but saw the highest gains of all Marin cities at 34%.
The “upper middle range” of the Marin market (Mill Valley, Sausalito and Larkspur) saw modest growth from 2.86% in Mill Valley with the biggest increase in number of sales year over year at 35, to 8.29% for Sausalito which added 13 sales while Larkspur hit a 15.38% increase with 19 more sales. Interestingly, Larkspur is starting to inch into that “luxury” category at a median price point of $1,800,000, while Sausalito and Mill Valley hovered around the $1.4 million median price point. We think that’s more telling of the number of lower priced condos that sold in Sausalito and Mill Valley that lowered those median price points. Larkspur kind of straddles that upper-middle range to luxury, but then again so do some neighborhoods of Mill Valley and Sausalito.
The Marin “Middle Market” towns of Corte Madera, San Anselmo and Greenbrae each saw healthy gains, but only Corte Madera increased the number of sales in 2017 vs. 2016.
And lastly, we hesitate to even call Fairfax, San Rafael and Novato as the “Low End” of the market as they are anything but low-end markets, but these are cities in which the median price point has still not topped $1 million, and what you would call entry level for Marin. Novato dropped in number of sales by 18, which may sound like a lot, but believe it or not, almost half of the sales in Marin occur in Novato and San Rafael. Each of these towns, along with Fairfax saw growth from 4-9%.
Not surprisingly, we saw the number of homes sold under $1 million decrease in 2017, primarily because there were so few homes available in this price range. Homes in the $1.5 to $5 million range showed healthy listing and sales volume in 2017. While homes in the $3 to $5 million range took a little longer to sell, the $1.5 to $3 million range took much less time, showing just how hot demand was in this price range for 2017. A few more homes sold in the $5 million plus category than last year, but they took almost 60% longer to sell. Homes at these price points traditionally take longer to sell even in the best of markets.
So, what does all this tell us about moving forward into 2018? Not that much, really. Only that it’s still competitive out there. Houses will sell for a premium if they are in a great location (basically all of Marin), but more importantly, if they’re well priced based on realistic comparable sales that don’t appear to be gauging buyers. I cannot emphasize enough how important a well-cared for, well-maintained home is to today’s buyers. If the home is not in great shape, buyers want to know all the home’s flaws up front so they can make a legitimate offer taking into consideration any improvements or repairs that they’ll need to make after the sale. Staging for sellers is critical. It’s like dressing up for a dance — you definitely want to put your best foot forward so you’re invited out onto the floor. Nobody wants to sit it out on the bleachers. And, no homeowner wants their house to sit on the market for long.
For buyers, we say “make it happen!” Put your best foot forward and really talk to your mortgage professional about what an extra $50,000 to $100,000 will mean for your monthly payments. Your offer should be strong, taking into consideration the number of competitors you’re facing and the terms you are offering. Maybe you can stretch a bit more. And, if you can’t, perhaps consider looking at a lower price point so you can come in strong with an over-asking price offer. Most of all, don’t give up. It may take you several tries to land the home of your dreams, but as we all know, the rewards are endless. Homeownership today, just like back in 1918, continues to be the American dream, and we’re here to help you achieve that dream.