While some have been concerned that a new “bubble” is forming, the reality is that soaring prices are simply supply and demand at work. Demand, fueled by buyers eager for a piece of pricey California real estate before prices rose even higher, crashed head on with contracting supply, which instead of growing to meet demand continued to shrink through the first weeks in the year.
Now, with the possible exception of Sacramento, soaring prices are having an effect on sellers, according to the most current weekly data from the Department of Numbers.
In San Francisco, inventories have increased 1.6 percent in the last week, 9 percent in the past month and 18.5 percent since January, but they are still 64.6 percent below the level of a year ago. In San Jose, inventories are up 5 percent in the week ending March 25, 13.7 percent month over month and 24 percent since January. Compared to a year ago, San Jose listings are about half of where they were a year ago, at 50.2 percent.
Sacramento, which has registered the fastest rising prices and fastest shrinking inventories in the nation though the fall and winter months and has become the unofficial headquarters for “flash sales,” where homes are being sold in 24 hours or less, is just beginning to turn around. Prices still rose 5.5 percent over the past 30 days and are up 56.8 percent on the year. In the past month, inventories are up only 1.5 percent, but they fell slightly from March 18 to March 25. Since January, Sacramento inventories have increased only 2 percent, or 80 listings.
Local real estate professionals point to a shortage of new homes caused by a lack of buildable parcels. It will take 18-24 months for new construction to truly impact available inventory, they say. Others point to the activities of institutional investors like Blackstone which bought 1,000 Sacramento homes last year. According to DataQuick, more than 38 percent of the homes sold in Sacramento County October, for example, went to so-called absentee buyers, typically, investors. Others point out that the surge is more of a bounce back from the housing crash. Some Sacramento-area homes lost more than half their value.