“We just saw four straight month-over-month gains in the Bay Area, after seeing it drop more than 17% in a month as recently as January,” said Matt Kreamer, a data spokesperson for Zillow. “That’s a sign that the market might be on the road toward rebalancing, though it will likely be a sellers’ market for quite some time still.”
Kreamer said the Bay Area is one of only a few places in the country where inventory is up from a year ago — but that’s mainly because it was already very low in 2020. In the San Francisco metro area, only 5,000 homes were for sale at one point in 2020.
“Overall, the main trend we’re seeing in the Bay Area and everywhere is that of people seeking out more affordable places to live, especially as many have become untethered from their offices thanks to an explosion in remote work,” Kreamer said.
For the second month in a row, the number of homes available for sale across the country rose in June, up 3.1% over May, which may be “an indication the market may be beginning to find more balance after long tilting heavily towards sellers,” according to the report.
According to the report, inventory dropped significantly over the pandemic due to an “intense demand for houses.” That drove fierce competition and a significant uptick in prices.
But the report notes that inventory is still low and demand remains strong, resulting in record highs for home value appreciation.
Zillow’s Home Value Index estimates typical home value for a region based on multiple data sources, including seasonal variations and the values of homes nearby.
In San Francisco, the Home Value Index began a significant rise in July 2020, reaching $1.296 million in June, up $172,435 or 15% from a year ago.
“Home values are climbing faster than they ever have before, up more than 15% from a year ago and nearly 3% from just a month ago in the Bay Area,” Kreamer said. “It will take more than a few months of modest inventory gains to offset the demand that is driving up prices so quickly.”
The U.S. Home Value Index was $293,349 in June, a 15% increase from a year ago, the highest increase since Zillow began collecting data in 1996.
The report identified similar trends in the San Jose metro area, which saw an increase of inventory from May to June of just 49 homes. The Home Value Index in the area, which includes Santa Clara and San Benito counties, was $1.433 million in June, up 3.7% month-over-month and up 17% from a year ago.
So what’s the bottom line for homeowners?
“Their homes are worth significantly more than they were just a year or even a few months ago,” Kreamer said. “It’s a great time to sell right now, so if a homeowner is thinking of moving somewhere else … they should be able to sell their home for a premium and have equity to use toward the purchase of their next home.”
But the conditions make buying tougher, despite historically low interest rates, Kreamer said. The continued increase in home prices makes it harder to save for a down payment, particularly in competitive markets where homes are selling above the asking price, such as the Bay Area.
The rental market has seen a strong recovery, especially in San Francisco, where rents plummeted earlier in the pandemic as many people left seeking more affordable cities and suburban environments.
The Zillow Observed Rent Index shows San Francisco’s typical rents have been increasing since the beginning of the year, up 1.9% month-over-month for a typical rent of $2,985 and up 6% since January. In San Jose, the Observed Rent Index is up 1.2% month-over-month for a typical rent of $3,015 in June, an increase of 4.5% since January. Across the U.S., typical U.S. rents increased 1.8% month-over-month.
Typical rents are found by calculating price differences for the same rental unit over time, then aggregating those differences across all properties repeatedly listed for rent on Zillow. The company also created weights for the index based on the latest U.S. Census Bureau data. Find the methodology here.
Kellie Hwang is a San Francisco Chronicle staff writer. Email: firstname.lastname@example.org Twitter: @KellieHwang