Bay Area home prices soar on suburban land rush

Buying a Bay Area home has almost become a million-dollar pursuit for the typical family.

Led by a suburban land rush in the East Bay and San Mateo County, the median price of a single family home in the nine-county region surged to $935,000 in February, a 16% increase from last year. The trend continues to push the country’s most expensive real estate market to peak price levels seen a few years ago, with double-digit percentage gains in six of nine counties.

Tight inventory and high demand for traditional suburban neighborhoods drove up median prices for an existing home in Contra Costa County 25% to $737,000, and up nearly 13% to $1.6 million in San Mateo, according to data from DQNews and CoreLogic. Alameda County home prices swelled 17% to $935,000, while Santa Clara County grew 4% to $1.29 million.

Only in San Francisco — where rents have plummeted and the condo market has sunk — have home prices stayed relatively flat, growing less than one percent to $1.47 million.

Bay Area agents say the single family home market this year has been filled with bidding wars, as-is and all-cash offers, and bargain hunters snapping up properties in outer-suburban cities like Manteca, Morgan Hill and Gilroy. Buyers are looking for extra room for home offices, and more outside space for family activities.

fa5eb SJM L HOMES 0403 90 01 Bay Area home prices soar on suburban land rushCoreLogic economist Selma Hepp said home prices have been particularly strong in pockets of the Bay Area farther away from costly Peninsula cities near major tech employers. In Contra Costa and Alameda, she said, “you have more space, but it’s more affordable.”

Home prices have steamed forward during the COVID-19 pandemic, with the relatively few homes on the market being pursued by first-time buyers and families looking for a bigger house and yard. Record-low interest rates during the pandemic have also allowed families to take on bigger mortgages and monthly payments.

A national study by Redfin found 39% of homes sold over their list price in February and March, and 76% of Bay Area homes listed on the site faced a bidding war in February. The Bay Area was the fifth most competitive market in the country, behind Salt Lake City, San Diego, Phoenix and Denver.

The migration to the suburbs after a year of remote work and home confinement has picked up speed. The traditional spring home-buying season started this winter. Home sales in February grew by more than one-third from the previous year, led by surges in the counties of Santa Clara (up 46%), Alameda (up 45%),  Contra Costa (up 36%) and San Mateo (up 27%).

Agents say the frenzy picked up at the beginning of the year. “The market is super hot,” said San Jose agent Gustavo Gonzalez. “There’s way more buyers than inventory.”

One property in East San Jose drew two unsolicited offers before it came on to the market, he said. There are simply not enough homes to meet demand, he said.

Even tech professionals are struggling to find homes, despite healthy savings accounts and incomes. “The techies are competing against each other,” Gonzalez said.

Doug Goss of Keller Williams in Los Gatos said to be competitive, buyers are waiving contingencies and quickly making offers. One single family home with valley views in North San Jose drew 22 offers, he said.

“It’s crazy,” he said. “There’s still very, very strong demand.”

Will Doerlich, broker and agent in San Ramon, has seen luxury homes — those that  sell for twice a county’s median home value — take off in recent months.  “People have an appreciation for how important home is right now,” he said. They’ve been willing to pay a premium in the East Bay to secure large properties loaded with amenities.

Peninsula homeowners have been looking to trade up for bigger homes in the East Bay, he said.

Doerlich said buyers are getting more fatigued and willing to quickly exceed the list price to win a property. Many have lost multiple bids, and are anxious to end the search, he said. “In this market,” he said, “you can’t count out the human factor.”

The strong stock market and remote-friendly professional tech jobs have benefited many Bay Area professionals, Hepp said. But she expects the recent increase in interest rates could slow the market from its late-winter peak.

“It’s going to take a little bite out of the competition,” she said. “I do think we’ll see some slowing.”

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