Thanks to a combination of rising interest rates and economic uncertainty, Real Estate in the San Francisco Bay Area have begun to chill, sharply.
In fact, housing prices in the nine-county region suffered their largest one-month drop on record, falling 7% from May to June, with median prices of existing single-family houses dropping from $1.5 million to $1.4 million, according to the San Jose Mercury News, citing the California Association of Realtors.
"From this point on we probably won’t see another record price, at least for this year, for either the Bay Area or for the state," said Oscar Wei, deputy chief economist with the California Association of Realtors, who noted that it's uncommon to see such a sharp decline in June - which is typically the busy summer home-buying season.
In the core Bay Area, Alameda County saw the largest monthly price drop of 8% to $1.42 million. That was followed by San Francisco County with a 6% decline to $1.9 million, Santa Clara County with a 6% drop to $1.82 million, Contra Costa County with a 5% dip to $976,940 and San Mateo County with a 3% drop to $2.16 million.
Still, Bay Area home prices were up 5% in June compared to the same time a year ago. But some counties did see year-over-year drops, including San Mateo (-5%), San Francisco (-3%) and Contra Costa (-1%). -Mercury News
The sharp reversal comes after Bay Area housing prices soared amid the pandemic, as house hunters with remote work capabilities took advantage of record-low interest rates to engage in intense bidding wars.
Now that mortgage rates are hovering around 5.5% for both jumbo and conforming 30-year fixed home loans, and not the 3% one could obtain during the height of the pandemic, the bottom looks to be dropping out of the market.
According to South Bay Realtor Mary Pope-Handy, the reduced demand for homes has caused houses to sit on the market longer as buyers and sellers play a game of chicken.
"It’s a lot of everybody waiting for the market to go up or go down," she said, adding "At some point the logjam will break because people still need to buy and sell."
That dynamic has likely contributed to home inventory increasing throughout the region. In Alameda County, the number of available listings has nearly doubled since last year.
Paddy Kehoe, a real estate agent with Compass in the East Bay, said active sellers now have to be more thoughtful about how they put homes on the market.
“If it is marginally overpriced it’s not going to sell,” Kehoe said. “Today, you have to know 100% what the price should be.” -Mercury News
"Going forward," said Wei, the CAR economist , "we will continue to see some slowdown, but it’ll be in line with the traditional seasonal slowdown rather than the sudden dip in that price shift."