Tight supply has led to higher price growth, especially in the metro areas of San Jose- Sunnyvale-Sta. Clara, Francisco-Oakland-Hayward, and Seattle-Tacoma-Bellevue. Given the steep increase in home prices, an interesting question is whether demand is starting to wane given the strong price escalation in these areas. To answer this question, we look at how fast properties are selling and the price appreciation in these areas, using market data from Realtor.com.
In San Jose-Sunnyvale-Sta. Clara, the median listing price was $1.1 million in October 2017, yet even at this price, properties continued to sell quickly, with the properties typically listed on Realtor.com for 31 days. In October of last year, the median days on market was 37 days, and the median price was at $900,050. Back in May 2012, the median listing price was $499,925, while the median days on market was 47 days. The continued downtrend in the number of days properties are on the market even as prices have escalated sharply indicates that demand remains strong in the San Jose-Sunnyvale-Sta. Clara market (or that demand remains strong, causing properties to sell quickly and prices to escalate).
In San-Francisco-Oakland-Hayward, the median price was $899,050, with the median number of days listed at 31 days. In October 2016, the median days properties were listed on Realtor.com was 35 days, with the median price at $830,050. Back in May 2012, the median price was $509,975, while the median days on market was 40 days. The median days on market properties are listed on Realtor.com has also quickened (although at a lesser pace than in San Jose ) even as home price also continue to appreciate sharply. That properties continue to sell more quickly even as prices have increased steeply also indicates that there is still strong demand in the San-Francisco-Oakland-Hayward (or that strong demand amid tight supply is fueling price growth and moving properties off the market quickly).
Demand for properties have also caused prices to increase strongly and properties to sell quickly in the Seattle-Tacoma-Bellevue metro area. Properties were listed on Realtor.com at a median of 37 days, down from 42 days in October 2016, while the median price rose to $495,000, from last year’s $430,050. Back in May 2012, the median price on market was $307,549, while the median days on market was 59 days. Again, the fast pace of demand properties are selling on the market even as prices continue to rise indicates that that demand remains strong in the Seattle-Tacoma-Bellevue market.
Inadequate construction relative to demand has elevated prices and caused a fast turnover of homes for sale. A comparison of the number of building permits to the number of job earning households (two job earners per household) shows the number of permits have lagged behind the number of job creation in many metro areas. In San Francisco-Oakland-Hayward, the number of building permits is short of nearly 80 thousand units compared to the net new jobs created when converted to households (two net new jobs will form one household). In San Jose-Sunnyvale-Sta. Clara, construction is short of nearly 30 thousand units. In Seattle, construction is short of about six thousand units. In California, the housing shortage is most dire in Riverside-San Bernardino-Ontario (129 thousand units) and Sacramento-Roseville-Arden Arcade (43 thousand units).
To conclude, the fast pace of sales even with rising prices indicates that demand remains strong in the metro areas of San Jose- Sunnyvale-Sta. Clara, Francisco-Oakland-Hayward, and Seattle-Tacoma-Bellevue. Strong job growth has fueled demand, and housing construction has not kept pace with the strong demand.