The Bay Area’s once-scorching housing market continued to cool in June, with home prices posting their biggest monthly decline in at least three decades this season.
In June, the median price of single-family homes in the nine-county region fell 7% from the previous month — from $1.5 million to $1.4 million, according to data from the California Association of Realtors. This is the steepest drop from May to June on record in the association’s regional home sales data since 1990.
What’s behind the record price drop? Real estate experts say rising interest rates, more homes sitting on the market longer and an increasingly uncertain economy — all could tip the Bay Area housing market after price hikes earlier this year.
“From this point forward, we probably won’t see another record price this year, at least for Berea or for the state,” said Oscar Way, deputy chief economist for the California Association of Realtors.
Wei noted that it is unusual to see such a sharp drop in prices in June, in the middle of the traditional summer home buying season.
In the core Bay Area, Alameda County saw the largest monthly price drop, 8 percent to $1.42 million. Next, San Francisco County was down 6% to $1.9 million, Santa Clara County was down 6% to $1.82 million, Contra Costa County was down 5% to $976,940 and San Mateo County was down 3% to $2.16 million. .
Still, Bay Area home prices rose 5% in June from a year earlier. But some counties saw year-over-year drops, including San Mateo (-5%), San Francisco (-3%) and Contra Costa (-1%).
During most of the pandemic, home prices have soared as house hunters — many who work remotely from the office and buy at historically-low interest rates — are locked in a mad rush for homes, sometimes bidding for hundreds of thousands of dollars in asking prices. .
But as the Federal Reserve raised borrowing costs this year to slow runaway inflation, mortgage rates for both jumbo and 30-year fixed mortgages rose to 5.5%. This is down from less than 3% during the epidemic.
Volatile financial markets have pushed some buyers out of the market, straining investment portfolios, adding to job cuts and raising fears of a possible recession.
In turn, Bay Area home sales fell 27 percent in June, the steepest decline in spring 2020 since the pandemic lockdowns halted most home purchases, Wei said.
South Bay Realtor Mary Bishop-Handy said the drop in demand has kept prices down and homes for sale longer, after some sellers jumped into the market in recent months to cash in on higher prices. Now, she said, many buyers and sellers are caught up to see who can blink first.
“It’s a lot of people waiting for the market to go up or down,” Pope-Handy said. “At some point the logjam breaks because people still need to buy and sell.”
That flexibility has contributed to an increase in furniture across the region. In Alameda County, the number of available listings nearly doubled from last year.
According to Paddy Kehoe, a real estate agent at East Bay Compass, active sellers now have to think more about how they put homes on the market.
“If it’s added at a low price, it won’t sell,” Kehoe said. “You have to know 100% what the price should be today.”
The California Economist Association of Realtors said the Bay Area is unlikely to see another month-over-month price decline of up to 7 percent, despite market conditions. That’s in part because, while the number of homes on the market has grown in the short term, the region’s years of slow housing construction remain tight compared to the rest of the Bay Area’s supply.
“Going forward, we will continue to see a moderate slowdown, but it will be more in line with a traditional seasonal slowdown than a sudden slowdown in that price trend.