Bay Area real estate markets showed further signs of normalization in the second quarter, with sellers across all of 
Pacific Union’s regions netting a smaller percentage of original price this June than they did last June. Nonetheless, sellers in the East Bay, San Francisco, and the Mid-Peninsula continued to enjoy premiums in every month of the second quarter.
Pacific Union’s second-quarter 2016 report is packed with data and regional summaries that offer a complete look at real estate activity in the Bay Area and the Lake Tahoe/Truckee region.
Our Q2 Report also includes a comprehensive chart tracking 10 years of home sales throughout the Bay Area and Lake Tahoe/Truckee — 77 cities, towns, and neighborhoods in nine regions. A smaller version of that chart, showing regional totals, appears below. Click anywhere on the chart to see the full data set, or click the image on the right to access the entire report and its detailed regional and community-level market statistics.
CONTRA COSTA COUNTY/TRI-VALLEY
Home shoppers in our Contra Costa County region had more properties to choose from in the second quarter of 2016, with healthy inventory increases from one year earlier. Buyers were less frenzied than in quarters past, perhaps weary of constant bidding wars or in response to the improved supply conditions. Normalizing market conditions were also evident in the pace of sales; by the beginning of June, homes were taking much longer to sell than earlier in the quarter.
At the high end of the market, we saw a surplus of $2 million-plus properties for sale – unusual for Contra Costa County. As of mid-June, only about one-fifth of those homes were under contract, and sellers who priced too aggressively often found themselves reducing prices in order to attract buyers in a timely manner.
Looking Forward: We expect typical seasonal patterns to follow suit in the third quarter – a relatively quiet July and August, followed by a jump in activity once school begins in September. As buyers are likely to have more homes to choose from, sellers will need to exercise particular caution about their pricing strategy in order to ensure a speedy transaction.
Defining Contra Costa County/Tri-Valley: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales statistics in the report charts includes single-family homes in these communities.
EAST BAY
Second-quarter sales activity in the East Bay was similar to what we observed last year — quite busy. In fact, the second quarter will likely go down as the most active quarter of 2016. In June, we began to notice a very slight shift in the market toward buyers, with fewer multiple offers and more price adjustments. Still, the East Bay remains very much a seller’s market, with roughly 80 percent of home sales involving multiple offers and about the same amount selling for more than original price.
Desirable homes in the region’s most popular neighborhoods continue to sell for record prices. As in quarters past, walkable neighborhoods near BART stations appealed most to buyers, with homes in the $800,000-to-$1 million price range seeing healthy sales. Unlike in some other Pacific Union regions, very few East Bay sellers keep their homes off the MLS, helping to ensure they receive the optimum price from the crowd of eager buyers.
Looking Forward: A lack of inventory still plagues the East Bay, and we expect that trend to persist for the foreseeable future, giving sellers a continued advantage. Activity may taper off some in the late summer, but we foresee no shortage of buyers once the traditionally brisk fall season gets underway.
Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales statistics in the report charts includes single-family homes in these communities.
MARIN COUNTY
Marin County home shoppers took a more cautious, measured approach in the second quarter, lacking the sense of urgency that characterized past quarters. Buyers were less likely to engage in bidding wars, and many refused to settle for properties that fell short of their ideal. Some sellers found that their homes were taking too long to sell and were considering renting them and trying for a sale next year.
That said, top-notch, well-priced properties continued to generate plenty of interest and multiple offers. Homes priced between $1 million and $3 million saw the highest sales volume. As in other parts of the Bay Area, Marin County’s ongoing inventory constraints are hampering affordability for many potential buyers, who are waiting for prices to settle before they can make a move.
Looking Forward: Although we expect the usual fall pickup in activity will occur to some degree, the rest of 2016 may not be as brisk as the past few years. The upcoming uncertainty surrounding the U.S. presidential election may also cause more buyer caution, though Marin County’s savvy real estate investors are unlikely to panic regardless of the outcome of global or domestic political affairs.
Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales statistics in the report charts includes single-family homes in these communities.
NAPA COUNTY
Home sales activity in Napa County was brisk during the second quarter, particularly when compared with the first quarter. This is in part due to a Wine Country seasonal listing trend, in which buyers wait for the region’s enchanting spring blooms to give their home an extra dose of curb appeal – particularly true at the high end of the market. Homes priced less than $2 million usually sold quickly; more expensive properties tended to take longer to find buyers, underscoring the importance of realistic pricing.
With Napa County currently enjoying a nice balance between buyers and sellers, multiple offers weren’t particularly common, and sellers typically didn’t receive premiums. More common were contingent sales for homes priced between $500,000 and $650,000, as move-up buyers needed to sell in order to afford their next home.
Looking Forward: We expect the market’s current momentum to carry over into the first part of the third quarter before the typical late-summer slowdown. Once summer turns to fall, activity should rebound, as buyers aim to settle into their new homes in time for the holidays.
Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales statistics in the report charts includes all single-family homes in Napa County.
SAN FRANCISCO
After several years of rapid price appreciation and frenetic overbids, we observed further signs of movement toward market normalization in San Francisco during the second quarter. Sales were still strong, but homes sat on the market longer than in past quarters – especially in the city’s northern neighborhoods and popular Noe Valley. One main reason for this is that many sellers entertained unrealistic expectations and, accordingly, overpriced their homes. Consequently, bidding wars occurred less frequently than in the second quarter of last year, and price reductions became more commonplace.
The sales pace wasn’t as brisk in the second quarter of 2016 as in the second quarter of 2015, although the drop-off wasn’t significant. At the high end of the market, many move-up buyers stayed put, uncertain if their existing home would command enough to allow them to afford their target home. All in all, while the San Francisco market remains tilted in favor of sellers, it is slowly moving toward a more balanced state.
Looking Forward: Though there is still plenty of demand for San Francisco real estate, we expect further trending toward market normalization throughout the rest of the year, even when adjusted for the typical late-summer slowdown. The pace and depth of this calming trend may be amplified by global economic uncertainties, including the fallout from Britain’s vote to withdraw from the European Union and the tightening of China’s financial markets.
SILICON VALLEY
Although home prices were up year over year in our Silicon Valley region in the second quarter, the market showed increasing signs of normalization. While bidding wars were still very much a fact of life in Silicon Valley, attractive, well-priced properties typically garnered two to four offers rather than the six-plus they attracted last spring. Buyers were more conservative with their offers than in quarters past and less likely to jump on properties the moment they listed. Sellers, for their part – particularly those with unrealistic price expectations – were less willing to fix problems with the home.
Although homes priced less than $3 million sold quickly, the pace of sales slowed somewhat at the higher end of the market. Properties at the highest end – above $20 million – often needed price cuts in order to attract buyers.
Sales volume declined in all Silicon Valley communities on an annual basis, with Woodside and Portola Valley seeing some of the most prominent drops. About 20 percent of home sales were never listed on the local MLS, down from nearly 30 percent in the first quarter.
Looking Forward: Sales activity in the region should remain moderate throughout the rest of the summer, especially with the recent inventory increases we’ve seen. Once buyers return from vacation and the school year begins, we expect the fall market surge to begin in earnest.
Defining Silicon Valley: Our real estate markets in the Silicon Valley region include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales statistics in the report charts includes all single-family homes in these communities.
Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales statistics in the report charts includes all single-family homes in these communities.
SONOMA COUNTY
Second-quarter sales volume in Sonoma County was consistent with the same period last year, with prices continuing their slow and steady climb, thanks in part to declining inventory. Currently, Sonoma County’s relative affordability compared with other Bay Area locations, along with excellent economic conditions and interest rates that remain near their historic lows, is helping to drive sales in both the primary- and second-home markets.
At some point, we expect that rising prices, and the eroding affordability that comes along with them, will take their toll and put a damper on demand, but that softening does not yet appear to be evident. For now, the Sonoma County housing market remains tilted in favor of sellers, although less so at the high end – $2 million and above.
Looking Forward: Inventory and sales activity picked up as the second quarter neared its end, but we expect a slowdown in the early part of the third quarter as summer vacations top real estate concerns. With the coming of autumn, the market should regain momentum, consistent with seasonal patterns we’ve observed in years past.
Defining Sonoma County: Our real estate markets in Sonoma County include the cities of Cloverdale, Cotati, Healdsburg, Penngrove, Petaluma, Rohnert Park, Santa Rosa, Sebastopol, and Windsor. Sales statistics in the report charts includes all single-family homes and farms and ranches in Sonoma County.
SONOMA VALLEY
Sellers in Sonoma Valley typically hold off listing their properties during the winter and early spring, waiting for blooming gardens to present their homes in the best light. That trend held up this year, which created an increase in new listings during the latter part of the second quarter. Sellers who put overly optimistic asking prices on their homes often found that the market wouldn’t bear them. By the end of the quarter, many sellers had reduced their prices, and homes stayed on the market longer than expected.
Nonetheless, it was a busy quarter. Some sellers found themselves in the unusual position of competing for buyers who had plenty of options. Well-priced properties continued to attract multiple offers, although far fewer than we saw a year ago. In the early part of the quarter, we saw a slowdown in sales of $1 million-plus properties, with plenty of inventory at that price point. By May, supply tightened, striking a better balance between buyers and sellers.
Looking Forward: The Bay Area’s strong economy should continue to have a positive effect on Sonoma Valley’s real estate market through the end of the year. The second-home market remains active, and move-up buyers are also busy, creating opportunities for first-time buyers. Sellers may have to settle for a little less than they hoped, as price appreciation appears to be normalizing.
Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales statistics in the report charts refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.
LAKE TAHOE/TRUCKEE
As the Lake Tahoe/Truckee region is largely a second-home market, it operates under a different set of parameters from the Bay Area. But since many buyers in the region own primary homes in the Bay Area, real estate activity there has an undeniable effect in the Sierra Nevadas. As home prices in the Bay Area slowly begin to normalize, some recent buyers are finding themselves with unexpected extra cash and taking the plunge on a vacation property, which helped drive the second quarter’s brisk pace of sales and the resulting drop in inventory.
Another factor fueling activity in Lake Tahoe is that sellers have become more realistic with pricing than in years past. This is both attracting more buyers to the region and quickening the pace of sales; it was not uncommon for attractive, well-priced homes in desirable communities to be under contract within a few days in the second quarter. Sales volume throughout the first half of the year was comparable with the same period in 2015, while the average sales price for all properties rose by about 13 percent.
Looking Forward: Unlike in the Bay Area, the Lake Tahoe region doesn’t typically see a late-summer slowdown; vacationing families may find themselves inspired to lock down a winter retreat before the ski season begins. We expect the current healthy sales activity to continue through most of the rest of the year, although it will likely begin to soften after Thanksgiving.
Defining Lake Tahoe/Truckee: Our real estate markets in the Lake Tahoe/Truckee region 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. Sales statistics in the report charts includes single-family homes and condominiums in these communities.