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Q4 2012

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Table of Contents 2012 Set Records – Here’s to 2013! Luxury Home Buyers Changing Their Ways

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CONTRA COSTA COUNTY 6 EAST BAY 10 MARIN COUNTY 14 NAPA COUNTY 18 SAN FRANCISCO 22 SONOMA COUNTY 30 SONOMA VALLEY 34 TAHOE/TRUCKEE 38


2012 Set Records – Here’s to 2013! 2012 was a blistering year for San Francisco Bay Area residential real estate, as most of our regions tallied their highest number of home sales since 2005. Back in Q2 we said jobs would drive our housing markets, and we hit the nail on the head. Exceptional job growth in San Mateo, San Francisco, and Marin counties spurred home-buying demand at a pace not seen in other U.S. markets. Due to a limited inventory of homes for sale, we also got the most interesting dynamic of our record-setting year: the return of “bidding wars,” or multiple offers, in most markets at price points up to $1.5 million. In 2013 we predict more robust demand, as job growth expands into other Bay Area counties. Continuing constrained inventory will create price appreciation for the first time since 2007. And if the appreciation continues through summer ’13, we will see “move-up buyers” re-enter the hunt for higher-end housing (over $1.5 million) in late August and early September. These buyers, who have been waiting patiently for their home values to rise so they can trade up to larger residences or better neighborhoods, will contribute to additional inventory in the mid-tier markets and improved demand in the higher end. Overall, we have a very positive outlook for Bay Area residential real estate in 2013. Whether you’re looking to buy or sell, remember that real estate is hyperlocal – and your best ally is a real estate professional who can provide you with exceptional local insight, knowledge, advice, and decision support. Happy New Year!

Mark A. McLaughlin, CEO, Pacific Union International Please remember to seek out local news, trend analysis, and expert advice for your real estate decisions.


Luxury Home Buyers Changing Their Ways Goodbye, bling. Hello, quality and value. That’s the new approach luxury home buyers are adopting in the San Francisco Bay Area, according to Alf Nucifora, chairman and founder of the Luxury Marketing Council of San Francisco. He says lessons learned from the recession, baby-boom buyers eyeing legacy purchases, and young tech turks who value function over form are fueling the trend. “The recession taught us that we can live without unnecessary extravagances,” says Nucifora. “And that has led to a systematic shift in the way people buy. We are less concerned with showing it on the outside but more concerned with enjoying it on the inside.” In addition, so-called baby boomers (born 1946 through 1964) now make up a significant portion of the luxurybuyer market, and they are shifting from making to preserving wealth. “We (boomers) played and we made and we splurged, but we don’t need the fancy cars, the watches, or the showplace home anymore,” he says. “Now it’s the notion of bespoke, of things crafted with an eye to enduring value. We have kids and grandkids and want a legacy to be handed off to them.” The young dot-com and IPO millionaires might not be thinking about their future family bequests, but many also eschew frippery for functionality. They choose jeans and T-shirts over Brioni suits and sink their money instead into elite experiences and artisanal comfort. They may not have the biggest house on the block, but there’s a La Cornue range in the kitchen and a custom Jacuzzi in the backyard. What this all translates to is a shift away from showy excess and toward a search for quality, value, and connoisseurship, especially in the $2 to $10 million range, says Nucifora. It’s the consumption of wealth on a quiet, introspective basis, as opposed to ostentatious display. “Buyers are now more focused on the view, the privacy, how good the kitchen really is -- things that go into the enjoyment of the family experience as opposed to letting me show my neighbors how big and wealthy I am,” he says. While luxury buyers still spend plenty of money, it’s now more often on things like interior remodels, home theaters, expensive custom cabinetry, or top-of-the-line appliances – items that create a high-end quality of life experience but are invisible to anyone on the outside. And even the most well-heeled buyers are looking for bargains. “They can easily afford to pay above listing price, but they want to get a deal because it affirms their sense of self, their smartness,” says Nucifora.


What does this mean for 2013? Expect to see these trends continue, he says. Sellers in these price ranges would be smart to invest in staging, because today’s value-savvy luxury buyers are willing to shell out for the right experience – and a luxury residence with empty rooms or dated furnishings doesn’t fit that bill. “In buying real estate, it’s that visceral reaction when I walk in,” Nucifora says. And, he adds, bad presentation is obvious: “When you walk into some of them it’s like entering an abattoir.” Pie-in-the-sky pricing schemes will also be a thing of the past, even as home values rebound; buyers in the highend market will continue to look for deals and choose substance over show-off style. The cachet of spending piles of money on a pile of bricks has worn somewhat thin, he says. “The recession taught us all that we can live without unnecessary extravagances, that we should look for quality, and really ask ourselves whether that purchase is absolutely necessary,” he says. “And most of us found out we can live without it.”

Bay Area 10-Year Overview Here’s a look at home sales in the Bay Area’s real estate markets in the fourth quarter of 2012, with a glance back at the 10 preceding fourth quarters.


Quarterly Real Estate Report Q4 2012

CONTRA COSTA COUNTY

Ellen Anderson Senior Vice President, Contra Costa County 925.743.9330 ellen.anderson@pacunion.com 101 Sycamore Valley Road West | Danville, CA 94526


Quarterly Real Estate Report Q4 2012

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Contra Costa County: Q4 Results

Sellers were in short supply in the fourth quarter in Contra Costa County, continuing a trend we’ve seen all year. The shortage meant available homes moved fast: Those that were priced fairly and without major flaws were snapped up quickly. A balanced real estate market typically has a six-month supply of inventory available, but we had only a small fraction of that amount in the fourth quarter, and the average number of days on the market dropped considerably from the fourth quarter of 2011. Buyers were undeterred, however. Most homes received multiple offers, which helped push prices higher. The shortage of homes made it difficult for first-time buyers, who were often outbid by deep-pocket investors and all-cash buyers. We saw more higher-priced homes in the fourth quarter than in previous quarters, and consequently more sales. Buyers looking for lower-priced homes had a much smaller supply of foreclosed and bank-owned properties to choose from, as banks increasingly turned to loan modifications and short sales. Looking Forward: We expect to see a solid increase in homes coming on the market by the end of January, with a busy first quarter of 2013, and continually rising home prices. The Bay Area economy shows no sign of slowing down, which bodes well for home sales. Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Concord, Danville, Diablo, Lafayette, Martinez, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales data in the charts below includes single-family homes in these communities.

Median Sales Price

Months’ Supply of Inventory


Quarterly Real Estate Report Q4 2012

CONTRA COSTA COUNTY A Member Of Real Living

Average Days on the Market

Percentage of Properties Under Contract

Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

CONTRA COSTA COUNTY A Member Of Real Living

A Closer Look at Contra Costa County


Quarterly Real Estate Report Q4 2012

EAST BAY

Pam Hoffman Senior Vice President, Managing Broker, East Bay Region 510.339.6460 phoffman@pacunion.com 1900 Mountain Boulevard | Oakland, CA 94611


Quarterly Real Estate Report Q4 2012

EAST BAY A Member Of Real Living

East Bay: Q4 Results

Buyers had a limited number of homes to choose from in the third quarter of 2012, and by the fourth quarter the market got even tighter. Nearly 75 percent of sales in our Montclair and Berkeley offices involved multiple offers, and buyers had to move quickly. A balanced real estate market has a six-month supply of inventory available, but the supply in the East Bay fell to 1.2 months in the third quarter and ended the year at barely half a month. November and December typically see a slowdown in sales as the holidays approach, but that wasn’t the case this year. Sales in most neighborhoods in the East Bay remained strong throughout the quarter, and buyer demand helped drive home prices to their highest level since 2007. The East Bay is a popular destination for buyers priced out of the San Francisco market, but first-time buyers were at a competitive disadvantage when bidding against investors and all-cash buyers. Looking Forward: Upward pressure on prices should encourage more sellers to put their properties on the market and ease the housing bottleneck. Buyers will be ready, especially with interest rates expected to remain at record lows through much of 2013 and prices still below their peak. Defining the East Bay: Our real estate markets in the East Bay include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales data in the charts below includes single-family homes in these communities.

Median Sales Price

Months’ Supply of Inventory


Quarterly Real Estate Report Q4 2012

EAST BAY A Member Of Real Living

Average Days on the Market

Percentage of Properties Under Contract

Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

EAST BAY A Member Of Real Living

A Closer Look at the East Bay


Quarterly Real Estate Report Q4 2012

MARIN COUNTY

Brent Thomson Senior Vice President, Marin County 415.383.1900 brent.thomson@pacunion.com 575 Redwood Highway, Suite 150 | Mill Valley, CA 94941


Quarterly Real Estate Report Q4 2012

MARIN COUNTY A Member Of Real Living

Marin County: Q4 Results

There was no shortage of buyers in the third quarter, but the sharply limited supply of homes held back sales in the fourth. A balanced real estate market typically has a six-month supply of inventory, but Marin County had only a small fraction of that amount. Every home that came on the market at a fair price sold immediately. Multiple offers were common, helping to inflate prices. The most active price point was for homes selling for $1 million to $2 million. Mill Valley remained especially popular, with sales volume up considerably. Tiburon also saw particularly strong sales. With a sharp rebound in the Bay Area economy, Marin County remained an attractive destination for buyers from San Francisco and for families moving to the Bay Area from out of state. Looking Forward: Barring monsoon-like weather, or shenanigans in Washington that hurt the economy, all signs point to a healthy first quarter of 2013 and the full year ahead. Our real estate professionals say many sellers are waiting until the end of January to list their homes, which will help ease the frantic pace of bidding on properties. We expect home prices to rise incrementally, but with interest rates hovering near record lows, buying a home will remain a bargain throughout the new year. Defining Marin County: Our real estate markets include the cities of Belvedere, Corte Madera, Fairfax, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the charts below includes single-family homes in these communities.

Median Sales Price

Months’ Supply of Inventory


Quarterly Real Estate Report Q4 2012

MARIN COUNTY A Member Of Real Living

Average Days on the Market

Percentage of Properties Under Contract

Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

MARIN COUNTY A Member Of Real Living

A Closer Look at Marin County


Quarterly Real Estate Report Q4 2012

NAPA COUNTY

Linda Carroll Branch Executive, Napa County 707.251.8805 linda.carroll@pacunion.com 944 Main Street | Napa, CA 94559


Quarterly Real Estate Report Q4 2012

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Napa County: Q4 Results

Homes sold briskly throughout the fourth quarter, even accounting for the cyclical decline during the holidays. Higher-priced properties at the northern end of the Napa Valley saw particularly strong sales. Farther south, a home selling for under $300,000 in American Canyon received 12 offers, and in the city of Napa most properties priced under $500,000 garnered multiple bids. Buyers who waited to make an offer, hoping to time their purchase at the bottom of the market, missed their opportunity. Some areas saw double-digit gains in prices, and the number of foreclosures and bank-owned properties on the market dropped off significantly while short sales increased. Investors purchased most homes priced below $500,000, making all-cash offers and converting them into rental properties. This made it difficult for first-time buyers to land a home. Overall, 2012 was a vibrant year. With buyers in abundance, interest rates at an all-time low, and a constrained inventory, many sellers experienced sales-price appreciation that had been absent for several years. Looking Forward: Our real estate professionals say they expect to see more homes coming on the market starting in mid-January. We project prices to rise 5 to 8 percent in 2013, with no slowdown in offers. Pent-up demand from buyers and low interest rates should make for another busy year. Defining Napa County: Our real estate markets in Napa County include the cities of Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the charts below includes all single-family homes in Napa County.

Median Sales Price

Months’ Supply of Inventory


Quarterly Real Estate Report Q4 2012

NAPA COUNTY A Member Of Real Living

Average Days on the Market

Percentage of Properties Under Contract

Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

NAPA COUNTY A Member Of Real Living

A Closer Look at Napa County


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO

Patrick Barber President, San Francisco Region 415.929.7100 patrick.barber@pacunion.com One Letterman Drive, Building C, Suite 300 | San Francisco, CA 94129


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living

San Francisco: Q4 Results The year 2012 was one of the strongest in recent memory for real estate, and the frenzied pace continued through the fourth quarter, even accounting for a brief lull during the holidays. Pent-up buyer demand and an exceptionally tight supply of properties on the market meant that many homes sold quickly and with multiple offers. A balanced real estate market typically has a six-month supply of inventory, but the supply of single-family homes and condominiums in San Francisco hovered near record lows in the fourth quarter. Homes sold well across the city, and the condominium market, which had slowed in 2010 and 2011, came roaring back. San Francisco’s rebounding economy, particularly (but not exclusively) the growth in tech-sector jobs, brought many new buyers into the market, helping drive up home prices by double digits. Looking Forward: Job growth is a reliable indicator of real estate activity, and that factor alone promises a good year ahead for the San Francisco housing market. Interest rates are expected to remain near record lows through much of 2013, making the outlook even brighter. After a likely cyclical slowdown in January, we expect to see additional homes come on the market and sales take off in February and March.

Single Family Homes – Median Sales Price

Condominiums – Median Sales Price


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living

Single Family Homes – Months’ Supply of Inventory

Condominiums – Months’ Supply of Inventory

Single Family Homes – Average Days on the Market


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living

Condominiums – Average Days on the Market

Single Family Homes – Percentage of Properties Under Contract

Condominiums – Percentage of Properties Under Contract


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living

Single Family Homes – Sales Price as a Percentage of Original Price

Condominiums – Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living

Delving into San Francisco’s Districts

San Francisco is defined by 10 separate districts, each of which encompasses several neighborhoods. District 1: Inner Richmond, Central Richmond, Outer Richmond, JordanPark/Laurel Heights, Lake, Lone Mountain, Sea Cliff. District 2: Outer Sunset, Central Sunset, Inner Sunset, Outer Parkside, Parkside, Inner Parkside, Golden Gate Heights. District 3: Pine Lake Park, Merced Manor, Lake Shore, Lakeside, Stonestown, Merced Heights, Ingleside, Ingleside Heights, Oceanview. District 4: Balboa Terrace, Diamond Heights, Forest Hill, Forest Hill Extension, Forest Knolls, Ingleside Terrace, Midtown Terrace, Miraloma Park, Monterey Heights, Mount Davidson Manor, Sherwood Forest, St. Francis Wood, Sunnyside, West Portal, Westwood Highlands, Westwood Park. District 5: Buena Vista/Ashbury Heights, Clarendon Heights, Cole Valley/Parnassus Heights, Corona Heights, Duboce Triangle, Eureka Valley/Dolores Heights, Glen Park, Haight-Ashbury, Mission Dolores, Noe Valley, Twin Peaks. District 6: Alamo Square, Anza Vista, Hayes Valley, Lower Pacific Heights, North Panhandle, Western Addition. District 7: Cow Hollow, Marina, Pacific Heights, Presidio Heights. District 8: Downtown, Financial District/Barbary Coast, Nob Hill, North Beach, North Waterfront, Russian Hill, Telegraph Hill, Tenderloin, Van Ness/Civic Center. District 9: Bernal Heights, Central Waterfront/Dogpatch, Inner Mission, Mission Bay, Potrero Hill, South Beach, South of Market, Yerba Buena. District 10: Bayview, Bayview Heights, Candlestick Point, Crocker Amazon, Excelsior, Hunters Point, Little Hollywood, Outer Mission, Mission Terrace, Portola, Silver Terrace, Visitacion Valley.


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living


Quarterly Real Estate Report Q4 2012

SAN FRANCISCO A Member Of Real Living


Quarterly Real Estate Report Q4 2012

SONOMA COUNTY

Rick Laws Senior Vice President, Sonoma County 707.547.3800 rick.laws@pacunion.com 3333 Mendocino Avenue, Suite 210 | Santa Rosa, CA 95403


Quarterly Real Estate Report Q4 2012

SONOMA COUNTY A Member Of Real Living

Sonoma County: Q4 Results

Buyer demand for homes in Sonoma County in the fourth quarter was held back only by a shortage of inventory. Sales dipped in December thanks in part to a cyclical holiday slowdown – but mostly because there weren’t enough homes available. A balanced real estate market typically has a six-month supply of inventory, but we saw only a small fraction of that amount in the fourth quarter. The lack of inventory had buyers scrambling, with most fairly priced homes receiving multiple offers that helped push prices higher. The number of properties selling for $400,000 to $800,000 rose significantly in the quarter, as did homes priced at $1 million and higher. Lower price ranges saw declines in the number of homes selling, in part because of the more limited supply of foreclosures and bank-owned properties in recent months. Additionally, banks have increasingly turned to short sales to clear inventory. Investors, stymied by the tight inventory of single-family homes, stepped up purchases of condominiums. Looking Forward: Springtime typically brings an increase of homes on the market. With prices gradually rising, a healthier economy than last year, and interest rates still hovering near record lows, we look forward to an active spring and summer. Defining Sonoma County: Our real estate markets include the cities of Cotati, Healdsburg, Penngrove, Petaluma, Rohnert Park, Santa Rosa, Sebastopol, and Windsor. Sales data in the charts below includes all single-family homes, farms, and ranches in Sonoma County.

Median Sales Price

Months’ Supply of Inventory


Quarterly Real Estate Report Q4 2012

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Average Days on the Market

Percentage of Properties Under Contract

Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

SONOMA COUNTY A Member Of Real Living

A Closer Look at Sonoma County


Quarterly Real Estate Report Q4 2012

SONOMA VALLEY

Jill Silvas Branch Executive, Sonoma Valley 707.939.9500 jill.silvas@pacunion.com 640 Broadway Street | Sonoma, CA 95476


Quarterly Real Estate Report Q4 2012

SONOMA VALLEY A Member Of Real Living

Sonoma Valley: Q4 Results

Real estate activity tends to slow toward the end of the year, as both buyers and sellers turn to other pursuits, whether holiday shopping or ski trips to Tahoe. But this year there was no slowdown in the Sonoma Valley, where sales held steady throughout the fourth quarter. The number of properties for sale dropped significantly in the second half of the year. A balanced real estate market typically has a six-month supply of inventory, but the supply dropped to a small fraction of that amount by the close of the fourth quarter. Buyers were undeterred, however, and bid aggressively for available homes. Even homes considered overpriced or less desirable that had been on the market for some time attracted buyers with few other options – raising the average days on the market for sales overall. Homes priced fairly generated multiple offers and sold quickly, while average sale prices rose over the course of the year. Looking Forward: Our real estate professionals expect to see significantly more homes on the market by midJanuary and through the spring, which suggests an active year for buyers and sellers. The Bay Area economy has rebounded and consumer confidence is rising – good signs for the housing market. Additionally, interest rates are expected to remain near record lows, making homes more affordable even as prices rise gradually. Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the charts below refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.

Median Sales Price

Months’ Supply of Inventory


Quarterly Real Estate Report Q4 2012

SONOMA VALLEY A Member Of Real Living

Average Days on the Market

Percentage of Properties Under Contract

Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

SONOMA VALLEY A Member Of Real Living


Quarterly Real Estate Report Q4 2012

TAHOE/TRUCKEE

Sally Gardner Branch Executive, Tahoe/Truckee Tahoe City 530.581.1882 | Truckee 530.587.7098 sally.gardner@pacunion.com


Quarterly Real Estate Report Q4 2012

TAHOE/TRUCKEE Tahoe/Truckee: Q4 Results

The Tahoe/Truckee region may seem like a world away from the Bay Area, but its real estate market told a familiar story in the fourth quarter: a dwindling supply of homes for sale and buyers forced into bidding wars for fairly priced properties. Properties still on the market for more than 60 days were often overpriced, less desirable, or problematic. Many properties in Tahoe/Truckee are second homes for Bay Area residents, and buyers tend to be picky – they’re not interested in homes that require repairs or remodeling. Luxury markets in Truckee’s Martis Camp and the Lake Tahoe basin were hot during the fourth quarter, and Tahoe Donner was the leader in most homes sold for $600,000 or less. Condominiums sold well during the quarter, as buyers found it easier to get financing for a condo than for fractionalshare properties. Looking Forward: The Tahoe/Truckee real estate market is heavily dependent on events in the Bay Area, and the rebounding economy in San Francisco and surrounding counties suggests an active year ahead. We expect to see an increase in homes coming on the market in the first quarter of 2013, with higher price points than last year. Interest rates are expected to remain near today’s record lows, making homes more affordable even as prices rise. Defining Tahoe/Truckee: Our real estate markets in Tahoe/Truckee include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe.

Single Family Homes – Median Sales Price

Condominiums – Median Sales Price


Quarterly Real Estate Report Q4 2012

TAHOE/TRUCKEE Single Family Homes – Months’ Supply of Inventory

Condominiums – Months’ Supply of Inventory

Single Family Homes – Average Days on the Market


Quarterly Real Estate Report Q4 2012

TAHOE/TRUCKEE Condominiums – Average Days on the Market

Single Family Homes – Percentage of Properties Under Contract

Condominiums – Percentage of Properties Under Contract


Quarterly Real Estate Report Q4 2012

TAHOE/TRUCKEE Single Family Homes – Sales Price as a Percentage of Original Price

Condominiums – Sales Price as a Percentage of Original Price


Quarterly Real Estate Report Q4 2012

TAHOE/TRUCKEE A Closer Look at Tahoe/Truckee


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