Bay Area home sales grinding down — could this be the top?
As Bay Area home prices rise, more residents are unwilling or unable to meet sky-high down payments and mortgages.
Home sales in the nine-county region slowed to their lowest point in August in seven years, as median sale prices again climbed double digits — 12 percent — to continue a record streak.
Bay Area home sales dropped 10 percent from the previous year, according to a monthly report released Thursday by real estate data firm CoreLogic, but super-hot prices in Santa Clara, San Francisco, Alameda and San Mateo counties pushed the median sale price of existing homes in the region to $860,000.
“This summer, we saw more buyers hesitate,” said CoreLogic analyst Andrew LePage. The number of homes sold in the region has fallen year over year for the last three consecutive months, he said. This summer’s activity was the slowest June-through-August period in seven years.
LePage attributed the decline to a lack of affordable choices and higher mortgage rates pushing up the cost of home ownership.
The average 30-year fixed mortgage rate climbed to 4.72 percent this month, its highest level since 2011, according to FreddieMac.
The smaller pool of buyers has allowed the local inventory of homes to grow, LePage said. “You’re transitioning from an extremely tight market to a tight market,” he said.
The region’s economic expansion has collided with long-standing, local resistance to building new housing, boosting home values for long-time property owners while leaving newcomers outside and struggling to buy in.
Typical home sale prices in the region have increased an average of 13.4 percent, year-over-year, every month since January, according to CoreLogic. Double-digit gains have now stretched for 13 consecutive months.
Every Bay Area county last month saw median sales prices for existing homes rise. Santa Clara increased 17.4 percent to $1.24 million; San Mateo increased 10.9 percent to $1.42 million; Alameda was up 13.8 percent to $910,000; Contra Costa rose 6.9 percent to $620,000; and San Francisco increased 16 percent to $1.48 million.
The number of homes for sale in California has been creeping up for the last five months after 33 months of decline, according to the California Association of Realtors. The increase in available homes in August was the greatest in nearly four years.
The unsold inventory index — which measures how long it would take to sell every home on the market, given the current sales rate — rose from 2.9 months in August 2017 to 3.3 months last month in California. Santa Clara and Alameda counties had a 2 month supply, while San Mateo and Contra Costa counties had 2.1 and 2.2 month supplies, respectively.
Agents have noticed the increased inventory. Tim Ambrose with Berkshire Hathaway in the East Bay said listings for home tours have doubled in recent months. Clients have more options as homes are sitting on the market longer.
Matt Rubenstein, an agent with Compass Real Estate in Contra Costa County, said he’s seeing more price reductions, an indication that some sellers are being too aggressive in a strong market. The East Bay market has been cooler than the South Bay, he said, and buyers still require contracts with contingencies for inspections.
“I’m not calling that a buyer’s market,” he said. “I’m calling it a level market.”
Mark Wong, an agent at Alain Pinel in Saratoga, said the market is still good for sellers, but coming back to a normal balance. “How you price a house is very crucial in this market,” Wong said. “At this point, we still have demand.”
Long-time homeowners in the South Bay have much to gain, even as they have seen their communities change dramatically over decades from a sleepy, orchard-filled valley to the center of the world’s technology and innovation.
Wong said homes in good school districts near the tech employment corridors continue to fetch strong returns. One of Wong’s clients, Scott Bailey, quickly sold the family home in August, about a year after Bailey’s father died.
Bailey’s parents, Richard and Helen, bought their three-bedroom, two-bath house in West San Jose in 1967 for about $28,000. Orchards and open space surrounded their little ranch home.
Richard Bailey taught students piano and organ in the home. He played a Steinway grand and performed at concerts and the neighborhood pizza parlor.
They grew peaches, oranges and apricots in the yard. They had an in-ground pool and a two-car garage. They raised a son and daughter, sent them to public schools, and a built a life on Ivy Lane for more than 50 years.
Over the years, the orchards became shopping malls and tech offices. The house stayed the same.
By Louis Hansen