Bay Area’s runaway housing market taps the brakes. Will the lull last?

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When Sean Cook put his family’s San Jose home up for sale for more than $3 million this summer, he assumed it would fly off the shelf in a week or two. A similar house in his neighborhood took just three days to sell for $3.3 million in the spring.

But two months after Cook’s four-bedroom home in the desirable Willow Glen neighborhood hit the market, he still hasn’t received a single offer — even after he shaved $200,000 off the price last month. “Given the way the market has been,” he says, “you feel a wee bit disappointed.”

After a record-setting run-up, the Bay Area’s red-hot housing market appears to be cooling. “For sale” signs are lingering longer in homeowners’ front yards, and alerts of price reductions — sometimes for hundreds of thousands of dollars — are cropping up on Zillow. And an array of market data — including sale prices, inventory numbers and tallies of discounted listings — supports the notion that the market has shifted in some counties.

Local agents blame an increase in inventory, buyer fatigue, rising mortgage interest rates and over-eager sellers inflating their prices higher than even the region’s turbo-charged market can support.

c4722 SJM L COOLING 0916 05 Bay Area’s runaway housing market taps the brakes. Will the lull last?
Homeowners Sean and Leslie Cook, not pictured, are selling their home in San Jose, Calif., on Wednesday, Sept. 12, 2018. The married couple haven’t had luck in selling their home for $3,199,000 since they put it on the market two months ago. They recently reduced the price by $200,000 to attract a buyer. According to local realtors, homes aren’t selling for as much as they did several months ago and are taking longer to sell. (Ray Chavez/Bay Area News Group) 

Even at a cooler pace, the Bay Area’s market continues to generate a heat that would be described as scalding anywhere else in the country. But the recent slowdown has left sellers scratching their heads, and potential buyers breathing sighs of relief.

“This is a market shift of sorts,” said Oakland-based agent Kerri Naslund-Monday of Keller Williams Realty. “For the Bay Area it won’t be dramatic; it will just be a pause.”

Wannabe buyers, discouraged after getting outbid again and again, are pulling back, said Sean Manning, a San Jose-based real estate agent with Sereno Group.

“They kind of got fed up and threw their hands up in the air and said ‘OK, we’ve got to take a break here,’” Manning said.

An increase in inventory also is allowing buyers to be more selective. More homeowners — unaware that the market has cooled slightly, and excited by the high offers their neighbors scored in previous months — are deciding to list their own properties, Manning said.

In Oakland, for example, the number of single-family homes for sale last month jumped 18 percent over the year before, according to MLS data from the Bay East Association of Realtors. Meanwhile, the number of homes sold decreased 11 percent.

In Santa Clara County last month, 25 percent of homes sold for less than their asking price, up from 19 percent in August 2017, according to MLSListings. Meanwhile, 68 percent of Santa Clara County homes sold above their asking price last month, down from 75 percent in August 2017.

That trend didn’t show up in San Francisco or San Mateo counties.

c4722 SJM L COOLING 0916 90 011 Bay Area’s runaway housing market taps the brakes. Will the lull last? Agents say buyers aren’t willing to pay quite as much as they were several months ago. In Alameda County, 27 percent of homes sold for less than their asking price last month, up from 21 percent in August 2017, according to the Contra Costa Association of Realtors. Sixty-four percent sold for more than their asking price last month, down from 70 percent in August 2017.

And more sellers — disappointed with a lack of interest in their properties — are offering discounts in an attempt to attract buyers. A recent Zillow report found that sellers in 9.5 percent of San Jose area listings slashed their prices in June, up from 7.2 percent a year ago. Rates of price cuts remained steady in the Oakland and San Francisco areas.

Janet Negrete, 37, has noticed the price cuts while browsing homes for sale online, but she’s not letting herself get too excited.

“It gives you some hope that maybe there will be a point where you can afford something,” she said. “But at the same time, you’re like ‘ahh I don’t think they’ll go down enough.”

Negrete, who rents an apartment in Santa Clara with her husband and two children, started trying to buy a home in 2011. She made at least seven offers — searching from Fremont to Concord to Gilroy, but kept getting outbid. Eventually, she gave up.

For 31-year-old Jasmine Porter, who recently started looking for a home to buy in Richmond, the price cuts are great news. She feels like she can take her time picking out her dream home, rather than rushing into a contract before prices climb any higher.

“It’s exciting,” Porter said, “because I was getting a little discouraged.”

d10fd SJM L COOLING 0916 04 Bay Area’s runaway housing market taps the brakes. Will the lull last?
Jasmine Porter with her son Dontae Butler, 11, stand on the porch of the apartment where they live in Richmond, Calif., on Tuesday, Sept. 11, 2018. According to local realtors, homes aren’t selling for as much as they did several months ago and are taking longer to sell. Porter is looking to buy a house. (Ray Chavez/Bay Area News Group) 

The housing market is still extremely strong — it’s just not quite as strong as it once was, Manning said. He sold a house in San Jose this month for $1.36 million, after receiving three offers. Four months ago he sold the house next door — which was the same size — for $1.5 million, with eight offers.

The season likely is partly to blame. August is traditionally a slow month for real estate transactions, because few families want to buy a house so close to the start of the school year. But the recent slowdown feels like more than the usual summer slump, said Naslund-Monday.  And this summer has been slower than last summer, said San Mateo County-based realtor Debbie Wilhelm.

Median sale prices for single-family homes have been falling since March in Santa Clara County, according to MLSListings. Last year, prices didn’t start dropping until May. Meanwhile, homes spent a median 13 days on the market last month, marking the slowest sale time since January 2017.

Real estate agent Joel Garcia, who recently slashed the price of a house in Oakland — twice — said those price cuts are the first he’s made since 2009.

“It’s been sitting on the market for two months now,” Garcia said of the five-bedroom home, now priced at just under $1 million. “Normally it only takes a week, two weeks, and it’s gone.”

The seller tried to drum up interest by offering to cover the buyer’s closing costs — paying for the realtor and other transaction fees — but to no avail, Garcia said.

d10fd SJM L COOLING 2 Bay Area’s runaway housing market taps the brakes. Will the lull last?
The real estate agent selling this five-bedroom home on Golf Links Road in Oakland (pictured on the right) reduced the price $100,000 since putting it on the market two months ago, but has yet to receive an offer. The price now is $998,888. (Photo courtesy of Joel Garcia of Coldwell Banker) 

Diane Whitney, 55, put her San Jose condo up for sale in early July, hoping to cash out at the peak of the market and use her windfall to buy a cheaper home outright in Oregon or Washington. Two months later, after dropping the price $45,000, Whitney worries she missed the peak.

“I wasn’t prepared for it, I’ll be honest,” Whitney said, of the disappointing reception her home has received. “I’m revisiting why I’m moving, and what my feeling is.”

Four months ago, Whitney’s condo would have sold in days with multiple offers, said Mike Gaines, her real estate agent.

Whitney listed her two-bedroom condo for $735,000, and after seeing no offers, reduced the price to $690,000 at the end of August. But even with the discount, Whitney, who paid $115,000 for the home in a foreclosure sale 22 years ago, will walk away with a hefty profit.

Cook, the owner of the San Jose home that’s been on the market for two months, is in a similar position — he and his wife paid $1.9 million in 2012 for the house now listed at $2.995 million.

“We’re still quite a healthy market,” said Jim Harrison, CEO of MLSListings. “It’s just instead of bringing 50 offers to the seller, it might be five now. It’s not quite the bidding war it was before.”

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