Bay Area home prices, sales continue to surge

Bay Area home sales continued on a path of record prices and growing sales, as aggressive buyers returned to compete for houses near tech hubs.

The median sale price for an existing Bay Area home in June remained at $1.2 million — a record level also hit in May — while sales volume grew from the previous month. But agents noticed some creeping hesitancy among buyers, although not enough to keep prices from rising in 7 of 9 counties during the last two months.

CoreLogic economist Selma Hepp said home prices may have peaked before the typical summer lull, when families are more likely to head out on vacation than a housing-hunting journey. High prices may also be pushing more buyers out of the market. “There are fewer people who can compete at that level,” Hepp said.

The gains were even more dramatic compared to a year ago, when COVID-19 restrictions limited home tours, slowed sales and distorted the market. The median sale price for an existing Bay Area home in June rose 27% year-over-year to $1.62 million in Santa Clara County, grew 25% to $898,000 in Contra Costa County, jumped 11% to $1.83 million in San Mateo County, increased nearly 30% to $1.2 million in Alameda County and went up 10% to $1.83 million in San Francisco, according to CoreLogic data.

Overall sales of homes and condos grew 60% from last June, and about 12% from May.

But how long will Bay Area home prices climb?

Comparisons between May and June show the region’s prices rising more slowly, with most counties seeing gains of between 2% and 6%. The median in Contra Costa County fell nearly 3% in June from the previous month, suggesting buyers may be feeling the pinch of heavy mortgages in suburban communities.

Economists expect the California housing market to cool in the next six months. CoreLogic expects a 7.5% increase in home values in the next 12 months, still faster than the U.S. forecast of 3.2% growth.

Bay Area real estate, like the national market, has boomed during COVID-19. Home values soared in the last year in three western states popular with California refugees: up 34% in Idaho, 26% in Arizona, and 24% in Montana.

U.S. home values have appreciated at record levels in recent months, according to CoreLogic data going back to the 1970s. “We have to slow down from there,” Hepp said.

Economists from the California Association of Realtors are forecasting smaller price gains for sellers for the rest of the year as more homes come up for sale and buyers have more choices.

Bay Area agents are already seeing more houses on the market, even as potential buyers have headed out on summer vacations. Home buying usually picks back up after Labor Day.

Pleasanton agent Tina Hand, president of Bay East Association of Realtors, said low interest rates continue to attract buyers. The rate for a standard, 30-year fixed mortgage remained under 3% at the end of July, according to FreddieMac.

But she’s also seen deals fall apart in recent months. “It’s not the feeding frenzy it was earlier this year and last year,” Hand said. “The good news is, there’s more inventory coming on to the market.”

East Bay homes took an average of 13 days to sell in May and June — about twice as fast as sales a year ago. Castro Valley, Alameda and Berkeley continue to be among the most competitive East Bay communities, according to MLS data.

Silicon Valley cities continued to attract buyers, with sales up in San Mateo and Santa Clara counties.

Cupertino agent Ramesh Rao said rising prices have made buyers more particular about their purchases. For buyers spending more than $2 million on a home near major tech headquarters, location and move-in ready condition are musts, he said.

Rao sold two spacious homes in Cupertino recently. Both fetched more than $2 million, around their listing prices, he said, but they sat on the market for more than a month. Many buyers seemed weary of paying a premium for homes located near major thoroughfares, he said.

Although taking a month to sell a home is typical in the rest of the country, he said, in Silicon Valley “if it doesn’t get sold in a week there’s something wrong.”

But Rao believes buyer sentiment has shifted in the last several weeks. Buyers who once looked at a potential bidding war and said, “Oh, man, I may not get this house,” are now asking a different question, Rao said. “Do I really want this home?”

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