Foreign investors have long been attracted by Bay Area commercial, industry and residential real estate. But that interest seems to be growing rapidly, especially among Chinese buyers. And that trend could have a very strong impact on housing prices in San Francisco, Silicon Valley and all around the Bay for years to come.
According to a recent survey by the National Association of REALTORS®, foreign clients purchased $92.2 billion worth of existing U.S. homes in the year ending March 2014, up 35 percent from the previous 12 months. About half of these foreign buyers live outside the United States, while the other half are recent immigrants or here on temporary visas.
China accounted for the largest dollar volume of international sales with 24 percent of all dollars spent on housing in the U.S. In California, 62 percent of foreign buyers came from Asia. Although exact numbers are hard to come by, it appears that much of that investment is flowing specifically to Bay Area real estate.
There area a number of reasons for the trend. The boom is partly because of globalization, but it also has to do with the rapid buildup of wealth in China, which had 2.4 million millionaires in 2013, up 60 percent from the year before, according to the Boston Consulting Group.
A recent article in the San Francisco Business Times noted a number of other reasons, including:
- The Chinese real estate market is overheated. A report by consultancy Knight Frank says that Chinese investors have set their sights toward the western world mostly because their own residential market has cooled significantly.
- Chinese companies have more freedom lately. Starting in 2013, Chinese companies could invest $1 billion abroad instead of just $100 million, the paper noted. Insurance companies could double the amount of their assets they put in real estate.
- U.S. and China got friendly and expanded visa limits last year. The Obama administration moved to extend visas for Chinese business people, students and tourists in order to spark investment. That’s helped open more doors for Chinese companies to open offices and for Chinese nationals to buy their own homes here.
- There’s been more matchmaking. The Business Times said Bay Area real estate developers have also received more help from city officials with finding Chinese capital partners.
- San Francisco has started to look more like Shanghai. The Times notes that China has more than 70 towers taller than San Francisco’s tallest building, the Transamerica Tower. But that’s starting to change as the Transbay district pops up, including one planned building that will be the second tallest in the city.
Don’t forget: It was Coldwell Banker Commercial that last year was responsible for the sale of the landmark 225 Bush Street high-rise to a Chinese development firm for $350 million.
Below is a market-by-market report from our local San Francisco Bay Area offices:
North Bay – The entire Marin market is seriously lacking in inventory, our Greenbrae manager reports. This is true throughout the entire county. One of our new listings in Sausalito priced at $1.2 million got nine offers, going well above asking price. Another listing priced under $1 million in Corte Madera received 12 offers and will close at well over $1 million. There is a general optimism that more properties will be coming on the market. It’s the same story in the Novato area…low inventory. Agents are saying inventory is coming in March. Sellers want to wait for spring. Even when an agent has a signed listing they are not sharing information until home is ready for market. The luxury market has picked up. Homes that had been sitting in 2014 are now selling. Homes over $1 million are selling quickly because of lack of inventory. Buyers that have been waiting are poised and ready. Our Santa Rosa-Bicentennial office says the under $500,000 market is getting a lot of attention with 4-6 offers per property being the norm. The move-up market is hampered by sellers who want to find a new home before putting their home on the market and therefore are writing contingent offers without their properties being on the market. Our Santa Rosa-Mission office notes that buyers are coming out and being aggressive when new inventory hits the market. Multiple offers are slow but only because the inventory is thin. When good inventory appears multiple offers are common. Our Southern Marin manager says overall market volume is off due to low inventory. He expects to continue to see unit sales off, but a higher average sales price. This trend will continue until we get more inventory. Although the overall market is slow due to super low inventory, the Previews luxury market is strong and steady, as evidenced by our CB Southern Marin offices getting acceptances on eight properties ranging from $2-3.6 million. More than half of these properties received multiple offers. The luxury property market demand is as strong as ever.
San Francisco – Our Lakeside office manager reports agents are gasping for listings. Buyers are relying on traditional hope for life after Super Bowl Sunday, yet the listings are like rain in a drought – soaked up by parched Buyers as they hit the ground, or before. According to our Lombard manager, throughout January, now into February, agents are looking for a bump in the inventory. Listings even dropped in the City after the Super Bowl. Our Market Street manager says inventory remains way too low, and buyer demand remains high. Those sellers that were ready to hit the market in January were rewarded with crowds at their open houses, and multiple offers on their offer dates. This period we saw as many as 21 offers on a modestly priced home. Now that the Super Bowl is past, there is hope for more homes being listed. However, even this is expected to be too little to meet current demand. If owners have any inkling of selling, now is a great time. Open houses are very well attended, our Sunset manager reports. Demand for properties across the board, including investment properties, is high. The market appears to be improving due to the increase of listing inventory as sellers are no longer in the “let’s wait until after the holiday” mode. The marketplace definitely can use more inventory to satisfy the current demand.
SF Peninsula – Burlingame agents are continuing to see some small increase in inventory, however the pent up buyers are snapping these properties up in multiple offers as soon as they come to the market. There’s a very slow inventory buildup in the Previews luxury segment. After a very quiet first two weeks of the year, our Burlingame North office manager says there seems to be a lot of activity for listings coming up in the next 30 days or so. Agents are working with sellers preparing their homes for the market. There’s some activity in the $3-5 million range if priced correctly. Even in this market pricing is critical and it is possible to overprice a property. If that pricing mistake occurs, a period of 7 days or longer on the market will not be the seller’s friend. Across the hills in Half Moon Bay, there was a lot more activity this week. More listings are coming on the market, but properties are selling quickly with multiple offers. There were 2 beach properties over $3.25 million and $3.488 million sold within 10 days. Our Menlo Park manager says open houses have been good. Not much action in Menlo Park and Atherton yet. Agents are spreading out to the peripheries to get business. In Palo Alto, increased demand and very low inventory. Prices are well beyond the expected. Agents say expect to be surprised! Our Redwood City-San Carlos manager reports agents are very slowly beginning to see an increase in inventory. They are still receiving and dealing with multiple offers on all properties. Open houses are extremely busy on both Saturday and Sunday. The Woodside-Portola market is slow. Agents are seeing a little pick up and many think they will be getting at least one listing in the next 30 days.
East Bay – Inventory is at a record low, our Berkeley manager reports. There are 10-15 offers on all listings. An agent received 15 offers on a house in Albany listed to $799k. Another listing in Oakland received 18 offers, priced at $539k. Both went way over with no contingencies. It’s hard to represent buyers. February listings inventory for the office look great. Lots coming on and agents are excited to see more action. In the Danville area, inventory remains very low and many Buyers are waiting in the wings. In the Fremont area, inventory continues to increase. Properties are selling with multiple offers, ranging from 2-20 – leading to selling over the asking price. Our Oakland-Piedmont office reports lots of buyers, not so many properties. There is an increase of inventory over January – nothing significant, but agents are able to get a few more of our buyers in to contract. From the paperwork coming in to the office it appears that there should a more significant uptick in inventory in March. Agents have noticed over the last couple of weeks buyers and potential sellers are finding each other through friends and relatives and come to the agents to put the deal together. The number of buyers continues to increase in the San Mateo area.
Silicon Valley – Our Cupertino manager notes that if agents had more inventory, they would set the world on fire! One open house had 500 visitors over the weekend. It’s not unusual to get 20+ offers on some of our listings. The lack of inventory is driving prices even higher in all cities, our Los Altos manager reports. Tear downs in Los Altos on a flat ½ acre, and over ½ acres are selling above $3.5M with many interested buyers. Each new sale is higher than the last, and buyers are reaching to be the winner. Condos are at all time highs also in Los Altos. The houses in Los Altos Hills under $4M are still receiving multiple offers and being bid up, but stagnant at $10M price range. Mountain View condos are all reaching new highs in sales, with many disclosures requested and multiple buyer offers. An Old Ranch Lane remodeled house in south Los Altos Hills had 8 offers, was listed at $2,999,000. Listing agent says they got “about $3.7m.” Buyers are getting some relief as new inventory begins to hit the market, according to our Los Gatos manager. Our San Jose Almaden manager notes more properties are coming to market but are selling quickly so inventory isn’t increasing by much. The average sales price is still increasing though. Almaden had an average sales price of $1,416,000 in January, which is up 26% from January 2014 and up 21.9% from December of 2014. Blossom Valley had an average sales price of $598,450 in January, which is up 12% from January 2014 and up 3.9% from December 2014. Our San Jose Main office manager says inventory is so low that multiple offers are commonplace on all properties. Open houses are well attended – even with the super bowl weekend. The local Willow Glen market kicked off a few weeks prior to Super Bowl Sunday weekend. Agents have had a number of new active listings come to the market. Open house activity has been swamped, agents are reporting. Buyers know the name of the game – that they need to move fast on presenting offers. Most agents are giving one weekend of open house then reviewing offers the following week. Yes multiple offers well over asking price is the norm. Our Saratoga manager reports the local market is healthy and brisk under $3 million. Over $4 million is good but not as many buyers and therefore slower.
South County – It is apparent that sellers are finally realizing that there has never been a better time to put their homes on the market. Local agents have been working very hard to get the word out to their clients. During the past several weeks Morgan Hill and Gilroy have seen an increase in the number of homes being listed for sale. Of course, the buying public is responding with multiple offers with final sales prices ending up well above asking. Both buyers and sellers are witnessing the market attempting to balance itself. At the present time, however, there is still not enough inventory to satisfy buyer demand—and so it remains a sellers’ market. Agents are remaining optimistic that the listing inventory will continue to increase as we enter into February.
Santa Cruz County – In 2014 for the month of January the inventory was at 376 homes in the County and 125 total sales. February increased slightly to 393 homes on the market and decreased to 109 total sales. January 2015 started with just 264 homes active on the market and agents saw 92 sales, which is proportionately more listings sold given the lower inventory available. As of the day of this report there are only 267 homes active on the market in the County and agents have seen more than 2 homes sell per day in February. As a result of having about 30% less inventory compared to last year and steady demand, they’re seeing multiple offers on many listings and anticipate that as inventory increases sales will likely increase quite a bit as well. The average sales price is currently $696,833 with a sale to list price ratio of 98.1%. Last year at this time the average sales price was $661,081 with a sale to list price ratio of 98%. The inventory of Previews Properties on the market has started to slightly increase, moving from 89 active in January to 91 active currently. Twelve homes sold for over a million dollars in January and 1 has sold so far in February. In January 2014 we saw 110 Previews Properties on the market with 22 sales, and in February 111 homes active and 14 sales. The low inventory has seemed to create some pent up demand, and we are seeing a lot of showings and multiple offers on many of the active Previews Properties. The average sales price of Previews Properties is currently $1,524,000 with a 95.3% list to sale price ratio. At this same time last year, the average sales price of Previews Properties was $1,308,891 with a sale to list price ratio of 93.8%.
Monterey Peninsula – The Monterey Peninsula is experiencing a terrible drought with no rain for the month of January, but unit sales were up 15% over last year. The last two weeks of January our offices received several new listings and many ratified contracts, again up over last year. With 14% of our January unit sales in the Previews category we are still seeing strength in this category. The $1 million and under price is really picking up in this market, and inventory is improving with about 4 months supply. Next week is the AT&T Pro Am golf tournament, which will highlight the beautiful Monterey Peninsula. This is our second busiest week of the year and it will certainly give us free exposure with the television coverage. We are looking forward to a strong February.
Market Watch is a bi-weekly column by Coldwell Banker San Francisco Bay Area president Mike James. Click here to view past issues.