Bay Area home shoppers stayed out of the market in February — with prices continuing to rise, few houses for sale, global unrest and stock market dips giving jitters to would-be buyers.
Home sales dropped nearly 20% from the previous February, with the steepest declines in the most expensive counties — Santa Clara, San Mateo and San Francisco, according to CoreLogic data.
At the same time, prices for existing homes pushed up 17% from the previous year, topping a $1.1 million median in the nine-county region. “It’s actually sad for buyers,” said veteran San Jose agent Gustavo Gonzalez. “It’s so competitive, so expensive.”
Economic uncertainties have given some Bay Area buyers pause before making a major investment. Stock prices dropped in the early months of the year, cutting into the wealth of many tech professionals. Interest rates have crept up steadily, reaching 4.7% for a standard 30-year fixed mortgage, up from 3.2% last year, according to Freddie Mac.
“People’s buying power has been reduced,” said Menlo Park agent Brett Caviness, president of the Silicon Valley Association of Realtors. “That’s the biggest issue — the uncertainty.”
Nationally, the housing market has been on a record streak. Home values grew 20% during the last 12 months, with double-digit gains in each of those months, according to CoreLogic.
CoreLogic economist Selma Hepp said demand remains strong, as about eight in 10 homes are selling above listing prices. “It’s just the lack of inventory,” she said.
With prices and interest rates rising steadily, buyers might be caught up in a fear of missing out, she said. “We thought there would be less demand at this point,” Hepp said.
CoreLogic expects higher interest rates and prices to cool the market in the coming months.
The Bay Area housing market remains tilted heavily toward sellers. All nine counties in the Bay Area reported double-digit price growth year-over-year.
The median price for a resale home in Santa Clara County shot up 29% to $1.65 million in Februrary, leaped 28% in Alameda County to $1.2 million, and climbed 22% in San Francisco to $1.83 million. Contra Costa County home prices rose 15% to $850,000 and jumped 12% to $1.79 million in San Mateo County.
With rising prices came slowing sales of existing homes, however. San Francisco plummeted 27%, Santa Clara dropped 25% and San Mateo fell 24% from last February. Condo and new home sales also slumped.
Bay Area agents say month after month of rising prices and a limited number of homes for sale has sent some shoppers out of the market. Some are waiting for better conditions and selection, while others have looked to townhomes and condos. The question of whether to stay or leave the Bay Area also looms for many prospective buyers.
Caviness said clients are asking themselves: “How long is it worth it to pay the price of being in Silicon Valley?”
He’s seen clients look to townhomes and condos as a less expensive alternative to single-family homes. Tight living quarters and communal spaces have fallen out of favor during the pandemic, but first-time buyers can find it easier to fit into a budget. The median price for a Bay Area condo was $796,000 in February.
For buyers, choices have been limited and competition fierce.
Pleasanton agent Sheila Cunha expects more homes to come on to the market for the spring selling season. “We hope we’re going to have more inventory,” she said, “but buyers are getting a little more scared.”
Buyers continue to want move-in ready homes, and renovations and upgrades have been paying off in higher sale prices, Cunha said. Buyers “want to move in and get on with their lives.”
She listed a three-bedroom, two-bath home on a busy street in Livermore for $799,000. With a new kitchen and enticing price for first-time Bay Area buyers, the seller was able to pick from a dozen offers. The deal closed for $925,000, she said.
Santa Clara County prices have risen from a pre-pandemic level of $1.24 million in February 2020 to $1.65 million in two years. Homes sell quickly, generally after one open house and a few days to collect bids and choose a winner.
“As soon as they come on to the market, they go off,” Gonzalez said. “There’s no time to think.”
He has noticed the continued, strong demand for more home and work space. Gonzalez helped two recent home sellers move out of San Jose for bigger homes, with smaller price tags, in Tracy and the Sierra foothills.
Remote work and the desire for bigger homes and lots have inspired many sellers. “When people call me, ” he said, “they’re ready to sell.”