For the first time in years, the tables are starting to turn in the Bay Area’s insane housing market — as prices drop, some sellers have been forced to make concessions.
They’re chipping in to help pay closing costs and even to buy points to lower mortgage rates — all to convince increasingly reluctant buyers that the time is right to purchase a home.
“I’m seeing sellers concerned about prices dropping,” said San Jose-based real estate agent Gustavo Gonzalez, who works with both buyers and sellers. While he said recent price drops have not been drastic, sellers are having to reset their expectations of what they can get for their property.
The change comes as June home sale prices dropped from the previous month in all of the five core Bay Area counties, according to new data from CoreLogic and DQNews. Meanwhile inflation and interest rates remain high, giving many potential buyers pause. But there’s no reason to assume the real estate market is about to come crashing down, experts say. After all, prices are still extremely high.
“The market is absolutely changing,” said David Stark, public affairs director for the Bay East Association of Realtors. “Particularly when you have buyers or sellers in the market expecting certain things to happen because that’s what’s been happening, when you do have a shift it’s a big deal and it raises some eyebrows. However, you’ve got to take a longer view.”
San Mateo County — the most expensive market in the five-county Bay Area — saw the median sale price of a single-family home drop from just under $2 million in May, to $1.83 million in June, the new data show. San Francisco fell from $1.9 million to $1.8 million, Santa Clara dropped from $1.8 million to $1.7 million, Alameda dipped from $1.4 million to $1.3 million, and Contra Costa — the most affordable of the Bay Area counties — went from $950,000 to $900,000.
The California Association of Realtors recently reported similar numbers, and the new data further cements the idea that the tides are turning.
The slightly lower prices may present an opportunity for buyers who previously had been boxed out of the market — especially if they shop around and try to find a below-average interest rate, said Sheila Cunha, president of the Bay East Association of Realtors. In addition, some sellers now are willing to offer various incentives that were unheard of when the market was hotter — such as helping a buyer “buy down” their mortgage by paying points upfront for a lower interest rate.
For sellers, the drop in prices can be distressing. Cunha has a listing on the market now that probably would have been priced several hundred thousand dollars higher if it listed in January or February.
“It’s just trying to remind the sellers that when they’re pricing their property, they need to be real,” she said. “We’re not living in the market that we’ve been living in for the last three years.”
The shift is coming as the Bay Area struggles with multiple economic stressors. Consumer prices in the Bay Area jumped by nearly 7% in June — the fastest year-over-year increase since 1984. Gas prices have soared since last year and the average interest rate for a 30-year fixed-rate mortgage peaked at 5.8% at the end of June, compared to 3% at that time last year, according to Freddie Mac.
“I’m seeing buyers somewhat shocked about the new interest rates because they’ve gone up and what they means about affordability and what they can purchase,” Gonzalez said.
In addition, the stock market has been volatile — adding an extra worry in a region where many homebuyers sell stocks to fund their home purchase, Gonzalez said. The combination of factors is causing some buyers to take a step back and re-evaluate their options.
The number of single-family homes sold in the five-county Bay Area dropped from 4,239 in May to 3,737 in June — a nearly 12% decrease. Summer is traditionally a busy time for home sales.
Even so, median prices in several Bay Area counties were up year-over-year in June. Alameda County saw the biggest jump, with a 10% increase. Santa Clara County saw a 7.4% jump, while Contra Costa County reported a 0.3% increase, San Mateo County saw no change, and San Francisco saw a 1.5% decrease.
That’s a change from the start of 2022, when year-over-year appreciation was generally in the high teens, said Selma Hepp, deputy chief economist at CoreLogic.
At the same time, in the East Bay as of June, single-family homes spent an average of 15 days on the market before selling — up only slightly from 13 days in June 2021, according to the Bay East Association of Realtors.
“To me, that’s a great indicator of buyer behavior and buyer confidence and enthusiasm for home ownership,” Stark said. “The market is still moving very, very quickly.”
And one month of declining home prices does not make a trend, Hepp said. Several factors may have influenced June’s decrease, in addition to the economy. Luxury home sales dropped in June, which helped drag down median sale prices. And travel recently picked up after a major lull during the pandemic, which could be another reason people aren’t buying homes, Hepp said. “Maybe people are just on vacation.”
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Author: Marisa Kendall