For the first time in years, the tables are starting to turn in the Bay Area’s crazy housing market — as prices drop, some sellers are being forced to make concessions.
They’re chipping in to help pay closing costs and buy points for lower mortgage rates — all to convince more reluctant buyers that the time is right to buy a home.
“I see sellers talking about prices falling,” said Gustavo Gonzalez, a San Jose-based real estate agent who works with buyers and sellers. While they say the recent price declines aren’t drastic, sellers need to reset their expectations about what they can get for their property.
The change comes as June home sales prices fell from the previous month in all five Core Bay Area counties, according to new data from CoreLogic and DQNews. Meanwhile inflation and interest rates remain high, giving pause to many potential buyers. But experts say there is no reason to assume that the real estate market will collapse. After all, the prices are still high.
“The market is completely changing,” said David Stark, director of public affairs for the Bay East Association of Realtors. “Especially when you have buyers or sellers in the market expecting certain things to happen because it’s happening, it’s a big deal when you have a shift and it raises some eyebrows. However, you have to take the long view.
In San Mateo County — the most expensive market in the five-county Bay Area — the median sales price of a single-family home fell from less than $2 million in May to $1.83 million in June, new data show. San Francisco fell from $1.9 million to $1.8 million, Santa Clara fell from $1.8 million to $1.7 million, Alameda fell from $1.4 million to $1.3 million, and Contra Costa – the most affordable of the Bay Area counties – rose from $950,000 to $900,000.
The California Association of Realtors recently reported similar numbers, and the new data further confirms the notion that the tides are turning.
Slightly lower prices can give buyers who previously stayed out of the market an opportunity — especially if they shop around and try to find a lower-than-average interest rate, said Sheila Cunha, president of the Bay East Association of Realtors. Plus, some sellers are now willing to offer a variety of incentives that were unheard of when the market was hot — such as helping buyers “buy down” their mortgage by paying points upfront for a lower interest rate.
For sellers, falling prices can be distressing. Cunha now has a listing on the market that would probably have been several hundred thousand dollars higher if it had been listed in January or February.
“It’s just trying to remind sellers that when they’re pricing their property, they need to be realistic,” he said. “We’re not living in the market we’ve been living in for the last three years.”
The change comes as the Bay Area struggles with multiple economic pressures. Consumer prices in the Bay Area jumped nearly 7% in June — the fastest year-over-year rise since 1984. Gas prices have soared since last year, and the average interest rate on a 30-year fixed-rate mortgage reached 5.8% at the end of June, according to Freddie Mac, compared with 3% at that time last year.
“I’m seeing buyers a little bit shocked about the new interest rates because they’ve gone up and what that means for affordability and what they can afford,” Gonzalez said.
Additionally, the stock market is volatile — adding additional worry to the area where many homebuyers sell stocks to fund their home purchases, Gonzalez said. A 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 fell 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, average prices in several Bay Area counties rose 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 early 2022, when year-over-year appreciation was generally in the low-teens, said Selma Hepp, deputy chief economist at CoreLogic.
At the same time, in the East Bay in June, single-family homes spent an average of 15 days on the market before selling — up slightly from 13 days in June 2021, according to the Bay East Association of Realtors.
“To me, that’s a good indicator of buyer behavior and buyer confidence and enthusiasm for home ownership,” Stark said. “The market is still moving fast.”
And one month of declining home prices doesn’t make a trend, Hepp said. In addition to the economy, several factors may have influenced June’s decline. Luxury home sales fell in June, which helped drag down median sales prices. And travel has 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 on vacation.”