The Bay Area housing market may have entered a cold phase as rising mortgage rates put pressure on buyers after two years of soaring home prices.
But that doesn’t mean that home values are suddenly returning to Earth. It’s far from that. The average price of existing single-family homes in the region reached a record $ 1.36 million in May, up 13% from the same month last year, according to the latest data from real estate analytics firm CoreLogic.
Still, housing experts say the sharp pace of year-over-year price increases seems to have peaked, but few predict that housing collapse is imminent.
Selma Hepp, Deputy Chief Economist at CoreLogic, said: “It wasn’t sustainable.”
CoreLogic predicts that Bay Area home price growth will drop to single digits by next summer. In other words, prices are not as fast as last year, but are still expected to rise across the region compared to the previous year.
Hep pointed out that rising mortgage rates are an important factor. According to personal finance site Bankrate.com, the cost of a 30-year fixed-rate jumbo mortgage has jumped to about 5.6% in recent months. In most of the Bay Area, if your mortgage is over $ 970,800, your mortgage is considered jumbo. The 30-year rate has fallen in the last two weeks, but it’s still almost double the rate of about 3% of most pandemics.
“Now that mortgages are much higher and cost of ownership has risen (significantly) from just a few months ago, it has impacted demand,” Hep said. “With fewer buyers, we’re starting to see more price cuts and more homes staying in the market longer.”
In San Francisco, Santa Clara, and San Mateo counties, this dynamic movement may have caused home prices to fall slightly for the first time between April and May this year.
All three counties saw a significant year-on-year increase. San Francisco was up 9% to $ 1.89 million, Santa Clara was up 18% to $ 1.8 million, and San Mateo was up 14% to $ 1.99 million.
Rameshlao, a realtor at Coldwell Banker Realty in South Bay, said he has seen homes purchased regularly at asking prices over the past few months. For most of the last two years, this was unthinkable as a house hunter who was freed from the office by working from home and wanted more living space.
Lao said competition could be further eased as the Federal Reserve is expected to continue raising borrowing costs to combat inflation.
“My advice to all clients when being a seller is better today than tomorrow,” he said.
Lao is also in recession, financial market decline, and Layoff of more technical departments It could further reduce housing demand in Silicon Valley.
“When there is uncertainty in your work, you don’t want to be in big debt,” Lao said.
Meanwhile, median home prices in Alameda County continued to rise monthly, while prices in Contra Costa County remained flat.
Alameda saw a price increase of $ 1.43 million in May, up 22% year-on-year. Contra Costa has traditionally been the most affordable of the Bay Area’s core counties, with the slowest annual price growth, ranging from 3% to $ 950,000.
Despite recent price increases, Janine Hunt of Red Oak Real Estate in East Bay said her local market is beginning to experience “necessary modifications.” In the Berkeley and Auckland areas, more properties are online and are on sale for longer. The remaining buyers can afford to spend time looking for the right home and sometimes expecting prices to go down.
“We are looking at a more balanced market. Are we more excited about it, especially when everything else in the world is in great turmoil?” Hunt said. Said.
Hepp of CoreLogic said home inventories are rising across the Bay Area, but the number of homes for sale is still low compared to historical averages.
The number of homes that change every month is also declining, reflecting buyer pullbacks in the face of highs and rising interest rates, Hep said. According to CoreLogic data, 5,642 homes were sold in the region in May, down 16% from the same month last year.
Throughout the pandemic, 39-year-old Alex Rubinski wanted to move from his dilapidated apartment in San Francisco to his home in East Bay or Marin County. However, as fierce competition for housing began to subside, rising mortgage rates meant that his monthly payments for homes in the $ 1 million price range surged about $ 1,000 a month. His equity investment was also hit and it became difficult to pay his down payment.
Eventually, Rubinsky, director of the medical device company, decided to suspend his home search. And he’s not sure if buying a home on his own income makes any sense in the Bay Area.
“I was looking forward to owning a home, I financially know that’s where I want to go,” Rubinsky said. “It’s just frustrating.”