As rising mortgage rates continue to cool the overall U.S. housing market, the Bay Area experienced the biggest month-over-month decline in home prices in July of any country. new report From the housing information site Zillow.
The average single-family home price in the San Jose, Sunnyvale, and Santa Clara metropolitan areas fell 4.5% from June to July to $1.56 million. Meanwhile, San Francisco-Oakland-Berkeley subway home prices fell 2.8% to $1.44 million.
Compare that to a national drop of 0.01% to $357,000.
Geoff Tucker, senior economist at Zillow, said it’s no surprise that the Bay Area is experiencing the steepest declines as soaring mortgage rates keep buyers out of the market.
“The number one reason is that this is the most expensive place in the country,” Tucker said. “Buyers had already reached their breaking point.”
Over the past two years during the pandemic, Bay Area home prices have seen home seekers (many of whom remote work unleashed them from their offices and backed by historically low interest rates) engage in a frenzy over homes. At times hundreds of homes were put up for bid, resulting in skyrocketing prices. A few thousand yen higher than the asking price.
But as the Federal Reserve has raised borrowing costs in recent months to curb runaway inflation, mortgage rates have surged in response. Frenzy demand and record highs coolCurrently, the average interest rate for matched and jumbo 30 year fixed mortgages is between 5% and 6%. Interest rates have fallen in recent weeks, but are about double the sub-3% rates available during the height of the pandemic.
Even a modest increase in mortgage rates can have a dramatic impact on the true cost of actually buying a home.
Mortgage payments for a typical home in the San Jose Metro are up 60% to $8,371 a month (including taxes and insurance), according to the report, compared to July 2019. That’s more than double the $3,369 median rent for all property types.
The average mortgage payment in the San Francisco metropolitan area is $7,623, up 56% from three years ago. The median rent in this area is $3,277.
Other areas where home prices fell significantly month-to-month last month include Phoenix (-2.8% to $470,800). Austin, Texas (-2.7% to $566,533). Sacramento (-2.5% to $611,287); Raleigh, NC (-2.5% to $457,006); San Diego (-2.5% to $894,246).
In addition to rising interest rates, Tucker said the region’s relatively large remote workforce and falling stock markets are causing buyers to pull back, depleting tech workers’ portfolios. . Some Bay Area tech companies such as Coinbase and PayPal also laid off at least several hundred workers.
“Suddenly, they realized their budget was much smaller than they expected,” says Tucker.
South Bay real estate agent Ramesh Rao said there are still plenty of local buyers looking for homes in good condition.
“What drives the market these days is precise pricing,” says Rao.
Zillow reports that the share of properties on sale in the San Jose metropolitan area was 19.5% in July, compared with 13.5% in June. The San Francisco Metro had a 17.5% share of reduced listings, compared to 12.5% the previous month.
Declining demand has meant more homes have been on the market for longer, increasing inventories across the region and driving prices down even further. said there is.
“Many sellers say I’m going to take the property off the market. I’ll be back,” he said.