September 2016 – Napa’s Population & Housing Growth
If you’re wondering what’s driving the housing prices up so high in Napa, look at two telling statistics:
Housing units growth
From April, 2010, to July, 2015, the population of Napa County grew by 5,926 residents, while the number of housing units grew by just 713.
Since the household size in Napa is 2.71 people, that means 2,186 new units were required to keep up with population growth. Hence, there was a shortage of 1,473 housing units. In other words, less than a third of the number of new units required to meet population growth was actually built. This applies to both owner-occupied and rental housing.
Napa County’s Housing Element Update report shows a projection through 2040 of population growth continuing to outstrip housing growth. The result will be housing units continuing to become more and more valuable as demand continues to outpace supply.
For both home owners and investors, this news is good. It means that Napa property values and rents will continue to increase long term and make investing in the county a very solid long-term return.
Investors should do well in all property types, from single family, to condos to multi-family. And while there will always be the cyclicality of the housing market that makes predictions for short term appreciation difficult, long-term appreciation is guaranteed barring a major unforeseen change in population growth or a complete change in the county’s land-use and/or housing development approvals policy.
What’s the Shift? It’s the inevitable cyclicality of the real estate sales market. It is the constant tide flowing from a sellers market to a balanced market to a buyers market to a balanced market and back to a sellers market.
In San Francisco and the Bay Area, we have been in a strong sellers market for the past three years. This year in San Francisco, single family home median prices peaked in February at $1,390,000 and have been trending down since then, currently at $1,335,000 in July. In a normal buying season, median price peaks in June or July (as it did in the past three years).
198 single family homes sold in July, down sharply from June’s 245, and also the lowest number of July sales in four years.
In the Condo/Loft market, median price has been bouncing around $1.1M for the past 16 months. This June’s $1,162,500 was the top so far (a fraction above last June’s $1,150,000), but it dropped sharply ($100,000!) in July to $1,062,500. Count on June being the top of the market for this cycle.
Mimicking the falling number of single family home sales, the 220 condo/lofts sold in July was also the lowest number of July sales for the past four years.
How to prepare? When pricing property, sellers and agents should be looking at three sets of data:
Once the market has started shifting, the critical action is to get out ahead of a falling curve. A great question to ask is “How much of the gain from the last three years do you want to give up? Because in a down-trending market, that’s the cost of incorrect pricing – the longer the property is on the market, the more of that gain is lost.
Median Sales Price: $1,335,000: Down 4% from February ’16 Peak of $1,390,000 Number Homes Sold: Down 7.6% Year-to-Date
Median Sales Price: $1,062,500 Down 4.5% From June’s Peak of $1,162,500 Number of Condo/Lofts Sold: Down 7.0% Year-to-Date
Condos/Lofts: 30 Days Up 50% Year-on-Year Single Family Homes: 22 Days Up 37% Year-on-Year
As in June, year-on-year Median Days on Market are up considerably for Resale Condos-Lofts clocking in this month at a 50% increase over July 2015. Likewise, Single Family Homes also continued the upwards trend , at 37% ahead of last July’s number. We still have a strong sellers market, but buyers are shopping more and standing on the sidelines more.
Months Supply of Inventory dropped slightly from June to July for Resale Condos-Lofts and was level for Single Family Homes. It is up, however, year-on-year
Condos/Lofts: 2.4 Months Up 50% Year-on-Year Single Family Homes: 2.1 Months Up 5% Year-on-Year
Resale Condos/Lofts: New Listings Down 5.1% Year-to-Date Single Family Homes: 202 New Listings Down 7.2% Year-to-Date
Single Family Homes New Listings dropped by 18 from June to July, 2016 and is also down 124 year-to-date from 2015.
Resale Condos/Lofts is also down year-to-date, with 76, or 4.4%, fewer new listings in 2016 than 2015.
Resale Condos/ Lofts: Overbids Down 78%: 8.3% vs. 1.8% Single Family Homes: Overbids Down Year-on-Year 38%: 16.7% vs. 10.5%
Why Months of Inventory is Rising:
Single Family homes have had 115 fewer sales in 2016 than 2015, while the number of new homes on the market has also fallen, but only by 124.
Likewise, Resale Condo/Lofts have had 92 fewer sales year-to-date than 2015, while the number of new listings has also fallen, but only by 76.
So, we have a less active sales market, coupled with a slight inventory build up, which leads to a larger months-of-inventory calculation.
While median prices of San Francisco Single Family Homes rose 11.41% in 2015 to end the year at $1,235,000, it was the smallest annual percentage increase since 2011. And they are still below their peak of $1,350,000 in May 2015. But Q1 2016 may signal a resumption of the torrid pace of Q1:2012-Q2:2015, with a jump of 5.6%, the biggest Q1 median price percentage increase in a decade.
Conversely, Resale Condo-Loft median prices had their first Q1 drop since 2011. And, it was the second time in the past three quarters that they dropped – Q3:2015 was down 6.9%. Resale Condo-Lofts have dropped to a median sales price of $1,100,000, down 4.35% from June 2015.
Both the Single Family Homes and Resale Condo-Loft Days on Market are following the typical seasonal patterns of spiking during the holiday season and dropping with the start of the Spring buying season.
And while both are slightly higher this year than in 2015, at 16 and 20 days respectively, they are both near historical lows.
Months Supply of Inventory is up slightly over 2015’s levels at 1.9 months for Single Family Homes and 2.2 months for Resale Condo-Lofts, continuing the strong sellers market.
Here as well, the Single Family Homes and Resale Condo-Lofts New Listings follow the typical seasonal patterns of dropping during the holiday season and popping back up with the start of the Spring buying season.
However, of concern is that there is a cumulative 85 fewer new listings for Single Family Homes on the market in January, February and March in 2016 than there were in 2015.
Resale Condo-Lofts had the reverse trend, with 32 more new listings on the market in January, February and March 2016 than in the same months 2015. This helps explain the longer Days on Market and downward median sales price trend.
Pipeline Could Deliver Huge Inventory of New Construction…
As of December, 2015, the San Francisco Planning Department’s Development Pipeline had 62,514 net new units in various stages of development, from planning applications filed to building permits issued and under construction. The graph below shows the breakdown of the development by the Planning Department’s Planning District.
Of the 8,933 Affordable Housing Units planned, 7,056 of them are in just three districts: Bayshore (3,449); South of Market (2,682); and South Central (925).
The information contained in this report is taken from a variety of sources including SFARMLS, SPUR, the City of San Francisco Planning Department, the Federal Reserve Bank of San Francisco, the Bureau of Labor Statistics, and others. The data may have errors, omissions and be subject to revisions and is not warranted. It is deemed reliable but is not guaranteed. Questions may be directed to Keller Williams San Francisco | 415.483.9285