Builders Can’t Keep Pace With Demand As Bay Area Housing Booms Again
SUNNYVALE (KCBS)— New townhome projects continue at a rapid pace in Sunnyvale, where home construction can barely keep up with demand. The 14 currently under construction probably won’t be empty for long. Home values increased nearly 11-percent nationwide over the last year, but homes in the Bay Area are getting even greater gains.
The Standard & Poor’s/Case-Shiller home price index released Tuesday showed that all 20 cities measured by the report posted year-over-year gains for the third straight month.
And prices rose in 15 cities in March from February. That’s up from only 11 in the previous month. The monthly figures aren’t seasonally adjusted and may reflect the beginning of the spring buying season.
Prices rose in Phoenix by 22.5 percent over the past 12 months, the biggest gain among cities. It was followed by the Bay Area (22.2 percent) and Las Vegas (20.6 percent).
Niccole Beckerman said her family has been priced out of the Silicon Valley.
“It’s really expensive. My parents were trying to buy a house and it’s really expensive just because the schools are really good,” Beckerman said.
The story is the same throughout much of the Bay Area. According to the San Francisco Association Of Realtors, the median Bay Area price for a single-family home has crossed above the $1 million mark for the first time since 2007.
The Inventory of available homes remains extremely low according to San Jose realtor David Martz. He said there are only about 1,000 homes for sale in a population of nearly two-million people in the greater San Jose area.
“Combined with the fact that we currently have interest rates at an all-time low, it’s possible to get an interest rate close to three percent, which is driving demand, so the buyers are out there in force,” said Martz.
Martz said four out of every five homes that come on the market here receive multiple offers, with prices, in some cases, going up hundreds of thousands of dollars over asking.
Despite the gains, a limited number of homeowners are putting their houses on the market. That’s helped lift home prices. And it’s made builders more willing to ramp up construction. Applications for building permits rose in April to the highest level in nearly five years.
The supply of available homes jumped in April, but was still 14 percent below its level a year earlier.
Stan Humphries, chief economist at Zillow, a real estate data provider, said that the increase in the Case-Shiller index has been skewed higher by cities such as Phoenix and San Francisco. Fewer homes are available in those areas because many homeowners still owe more on their mortgages than their homes are worth. That makes it difficult to sell.
Still, even excluding those markets, home prices are rising steadily nationwide, Humphries said. The increases are “certainly confirmation that the housing market is experiencing a brisk recovery,” he added.
The housing recovery is creating more construction jobs and bolstering the economy in other ways. Higher home prices make homeowners feel wealthier and encourages them to spend more.
Rising prices also encourage more would-be buyers to purchase homes, before prices rise further. They also enable more homeowners to sell homes, by reducing the number of people who owe more on their mortgages than the homes are worth.
Prices have been increasing steadily since last summer. Still, they are about 29 percent below the peak reached in July 2006.
Banks have raised their credit standards since the housing bubble burst and are demanding larger down payments. That’s made it particularly hard for potential first-time buyers to get a mortgage.
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