Home Buying in San Jose>Question Details

Kim, Home Buyer in Danville, CA

There are a lot of new house construction going on in Dublin,CA. Can someone know the impact on the house prices in Pleasanton, San Ramon,?

Asked by Kim, Danville, CA Wed Sep 26, 2012

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Doug Jones’ answer
House prices are now going up all over the Bay Area. We have been on an upswing for 4-5 months and it is a rapid upswing. Construction shows that the builders are confident and that lenders are lending again agressively. I am in San Jose and houses remain on the market only for a couple of days and many times are sold in one day. Pleasanton and San Ramon have always been desirable and the house prices there will certainly be on the same trend as most of the Bay.
1 vote Thank Flag Link Wed Sep 26, 2012
Those of us expecting a slow market in 2012 were jolted by the sudden buying frenzy that began at the beginning of March … that hasn’t slowed since. It seems that everyone got the memo at the same time: “Prices are finally at the bottom and interest rates are at record lows – buy now or miss out.”

Buyers hit the streets like a swarm of ants to a picnic – and existing inventory was carried off in a few short weeks. Sellers have not stepped up to replenish supply for a number of reasons – many are still under water, others, seeing the market surges, are hoping to ride it to new highs and cash out when it peaks – whenever that is. Bottom line: we’re in a housing famine and will continue to be so until we get more inventory.

I personally believe that the sharp increases in housing prices are not economy driven – they are instead the result of a lack of inventory – it’s simple supply and demand economics.

It appears that new home builders, standing on the sidelines for the past few years, have decided it makes sense to get back in the game. I agree.

Here are a few posts (written for the Central County market, but still applicable to the Central Valley) that will help you understand what has been going on in the current market and some potential consequences:

Cash Offers Overheat Housing Market
http://ebpublishing.com/index.php?option=com_content&vie…

Central County Sellers’ Market Goes ‘Insane’
http://ebpublishing.com/index.php?option=com_content&vie…

Midwest Drought Mirrors Current Housing Market
http://ebpublishing.com/index.php?option=com_content&vie…

You ask, “There are a lot of new homes being constructed in Dublin, CA. Can someone explain the potential impact on the housing prices in Pleasanton and San Ramon?”

As I mentioned above, current pricing surges are the result of a lack of inventory. To make matters worse, cash buyers have entered the market and are making it almost impossible for FHA and VA buyers to purchase a home. MANY buyers have left the market in total frustration and are waiting for a game changer of some kind. New home builders may be the answer.

Cash buyers typically do not buy new homes, leaving a window of opportunity for those who see no other way of getting into the market. Builders accept the types of loans (FHA, VA) other regular sellers are currently not interested in. I believe the flow of new homes to the market in Dublin will help alleviate some of the pent up pressure and frustration of buyers who are having a hard time getting a home any other way. In addition, for those who prefer newer homes or more contemporary styles, new homes represent the ideal choice.

I personally believe that we will see a slight slowing in market volatility as new homes help meet some of the projected need, but do not anticipate a reduction in pricing in either Pleasanton or San Ramon. There simply aren’t enough new homes being built to meet the entire need. Additionally, while many want a new home, they don’t want the commute into the East and South Bay – so they are looking for homes in places closer to where they work.

If we see DO a slowing of market dynamics and corresponding reductions in prices, I believe it will be the result of other market forces – we have an election in a relatively short period of time, we are entering the fall season where the market typically cools and there is still vast uncertainty as to the impact Europe’s economic woes will have on the US housing market.
1 vote Thank Flag Link Wed Sep 26, 2012
Thank you for your question Kim:

Carl Medford has given you an excellent response.

Normally, an increase in supply will depress prices. However the increase in supply is far smaller than the enormous amount of demand that we currently have in this market.

Essentially, we have pent up demand that has been building up over the past 4 years. As Carl Medford pointed out, large numbers of people who had been sitting on the sidelines have jumped back into the market. This jump in buyer demand really began back in March of this year.

The result has been a sell off of most of the existing housing inventory, and we have seen multiple offers and overbids on houses, immediately, as the houses come on the market. It is not unusual to have 4,5,6 or more offers with overbids over the list price and recent comparable sales. Occasionally we have 30 to 40 or more offers on a house.

The number of new houses coming on the market is too small to have a depressing effect on housing prices. There is an enormous shortage of housing, in the bay area. The number of new houses is too few to alleviate the housing shortage in the bay area.

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
DRE#00901872
.
0 votes Thank Flag Link Wed Sep 26, 2012
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