Demand far outpaces homes for sale in 2004 Demand far outpaces homes for sale in 2004 (December 31, 2004)

Realtors look for double-digit price increases to continue
by Jeb Bing

Strong demand and a continued low inventory of available homes have combined to keep the Pleasanton residential housing market at a frenetic pace through most of 2004, with prices again setting new records.

Realtor Shelley Cartier of Cartier Properties said only 75 homes were available in mid-December with prospective buyers frustrated that they were unable to find suitable housing in Pleasanton. Overall, a total of 1,325 homes were purchased on the resale market, 50 less than in 2003 and even fewer than in 2002, when 1,389 homes were sold.

Yet even with fewer available homes on the market, the total dollar volume as of mid-December broke the $1 billion mark for the first time in housing resales, totaling $1,004,994,276, with an average price of $758,486, also a record high. For sellers, it took only an average of 15 days for the sale to be completed, compared to 25 days last year and 23 in 2002.

"We've had a very crazy market this year," said DC Wei of Prudential California Realty. "We have very few houses on the market to show and more than 500 brokers trying to sell them. It's a hot market, very competitive and this will continue well into 2005."

Wei said that although the market cooled a bit in September when interest rates started climbing, prospective buyers came back in early fall when mortgage rates stayed low and the number of loan options increased. He believes the number of homes on the market will continue to be tight, with many more buyers than sellers and escalating prices.

Marty Sborov, an agent with Intero Real Estate Services, agreed.

"We're looking at a median price increase of more than 21 percent for 2004, and that's going to continue," she said. "It probably will be less, something like 15 percent in 2005, but still double-digit. So even though total sales are down because of a shortage of sellers, the volume in terms of sales prices will keep going up."

Sborov said that although buyers are continuing to find attractive, affordable mortgages, this momentum could slow towards the end of 2005 when analysts are projecting mortgage interest rates of 7 per cent or more.

"That's when me may start seeing a slowdown," she added.

With few homes on the market, January promises to be a good month for sellers to maximize the value of their respective homes as more buyers search for housing after the holidays.

"We're short on inventory and high on demand," Sborov said. "I keep reading about a bubble of buyers slowing down sales because of high prices, but I don't see that happening here. Unlike other parts of the country, we're not building too many homes; we aren't keeping up with demand as it is. This is California, not Indiana."

Her comments came as two regional organizations reported major shortfalls in available housing for a growing California population. The Bay Area Council reported that the nine counties and 101 cities it represents are facing an annual construction shortfall of 36,000 housing units, with a serious crisis in the shortage of affordable housing for lower income families. The Association of Bay Area Governments (ABAG) blamed the lack of government incentives and a state law to require cities to provide their "fair share" of affordable units.

Both groups said continued prices escalation in cities like Pleasanton force more workers and their families to purchase homes farther from their jobs, adding to environmental concerns and family stress.

Sborov said that as Pleasanton nears buildout with only 2,500 home sites left for housing, demand in the resale market will soar.

"We're about to have the same problem Palo Alto found when housing construction stopped there," she said. "Prices will skyrocket."

Even today, almost all of the new homes being built by Greenbriar Homes and other developers in Ruby Hills and the Vineyard Corridor are priced over $1 million. Even Ponderosa's new homes that will soon go on the market in its Ironwood community at Valley Avenue and Busch Road will be pricey, with its cheapest models starting at over $800,000.

"The fact is that there are just a lot of people in the Bay Area who want to move here and can't find a house," Cartier said. "I had one house a few weeks ago where there were eight simultaneous bids."

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