Recent Redfin data shows that home prices have dropped since last year, but surprisingly, bidding wars are still taking place in almost every County of the Bay Area. While it may seem counterintuitive, this phenomenon is attributed to several factors, including low inventory, increased demand from buyers who are taking advantage of slowly decreasing interest rates, and a sense of urgency among some buyers who fear that home prices will not be coming down anytime soon.
San Jose is leading the way, and the South Bay area experienced the most significant decline, with a 17 percent drop in median home prices in February year over year, the biggest decline since 2015 when Redfin began tracking the data. San Francisco and Oakland saw an 11 percent decline, while Sacramento’s prices fell by almost 9 percent.
It is straightforward when we break it down. Interest rates directly reflect home purchases, so sellers who are also looking to buy have opted to stay put, which has significantly reduced inventory. Sacramento saw a 50 percent decline in new listings year over year, while San Francisco, Oakland, and San Jose experienced a decrease of over 40 percent. There are definitely fewer buyers in the market, but there are also way fewer homes on the market, so the demand still far exceeds the supply.
Although recent financial news, including the failures of Silicon Valley Bank and Signature Bank and the drop in value at First Republic, led to declines in interest rates, further sparking more mortgage applications, it also spooked prospective buyers, especially those in tech. Real Estate Agents can see the correlation of some Bay Area buyers pausing their search due to jitters around layoffs and banking troubles, especially tech workers who are worried about losing their jobs.
In summary, the “decline” in home prices in the Bay Area is hard for us Real Estate Agents to see when we see a strong demand for homes on a daily basis. However, it is essential to be aware of the current financial climate and potential job insecurity in the tech industry. Despite these uncertainties, the overall U.S. market is seeing a positive change, and with renewed buyer enthusiasm, we may see a rebound in the housing market soon, especially with interest rates on the decline.