Bay Area home prices showed no sign of slowing down in March, as buyers rushed in to take advantage of low interest rates before the recent turbulence in the economy hiked the cost of borrowing money.
Prices of existing single-family homes jumped 21.7% from the previous year, driving the median price of a Bay Area home to $1.25 million. In the highest priced county, San Mateo, the median price now sits just below $2 million, according to sales data from CoreLogic and DQNews.
High prices and increasing mortgage rates are closing the door on home ownership for even more middle-class families, agents say. On Wednesday, the Federal Reserve bumped interest rates up another half-percent, or 50 basis points, the largest hike in more than two decades. The rate on a standard, fixed 30-year mortgage now hovers around 5.3%.
“Our poor middle class is still getting hit,” said East Bay agent Janine Hunt. “There’s a phrase that we hear often: ‘I can’t even afford what I don’t like.’”
The squeeze of low inventory and high demand sent buyers digging deeper into savings, and sellers reaping windfalls from seven-figure offers above their list price.
Alameda County provided the most heat in the white-hot market, with the median price vaulting 30% year-over-year to $1.28 million. Santa Clara County home prices jumped 26% to $1.8 million, San Francisco increased 14% to $1.83 million, San Mateo County grew nearly 10% to $1.92 million, and Contra Costa County rose 5.8% to $899,000, according to CoreLogic data.
CoreLogic chief economist Frank Nothaft said demand swelled as buyers rushed in to take advantage of lower interest rates. The combination of higher prices and rising mortgage rates have begun to erode affordability for many homebuyers. “Silicon Valley and the Bay Area are the poster child,” he said.
U.S. home prices rose 20.9% in March from the previous year, the highest 12-month jump since CoreLogic began tracking the measure 45 years ago.
Overall sales of existing single-family homes fell 7% across the region, with transactions dropping in every county except Napa.
Agents say many homeowners have been reluctant to plant a for sale sign in their front yard. Bay Area sellers remain concerned about taxes on their gains, or feel locked into low interest rates on their current mortgages. The Russian invasion of Ukraine, inflation and a jittery stock market have also added uncertainty to the real estate market.
Burlingame agent Caroline Dinsmore said competition remains high, with buyers looking to get into a home before interest rates rise again. “There is inventory,” Dinsmore said, “but there’s way more buyers than inventory.”
Single-family homes listing for $2 million in San Mateo County are “kind of entry level,” she said. Buyers are still looking for updated homes, but are often settling for clean properties needing a few modern renovations, she said.
Even condo sales have picked up, as first-time buyers seek less expensive entries into the real estate market, she said. Townhomes and condos, with smaller units and common spaces, fell out of favor during the pandemic. The median price for a Bay Area condo increased 12% in March from the previous year, from $735,000 to $825,000.
Bay Area bidding wars and wild premiums over list prices continued.
Saratoga agent Mark Wong has kept an eye on April local sales data in Silicon Valley. In desirable cities, 57 properties sold for more than $500,000 over the list price, and 10 of those homes sold for more than $1 million above asking.
Some agents have been pricing homes well-below market rates to drive bidding wars, and competitive buyers are going for the win, he said. “That’s the mentality of Silicon Valley,” Wong said. “Nobody wants to lose, everybody wants to win.”
More homes have been coming up for sale in recent months, giving buyers a few more choices. For buyers, Wong said, “I think we’re starting to see some light at the end of a very, very, very long tunnel.”
More buyers are bumping up down payments to lower monthly costs, agents say. The rising interest rates can add hundreds or thousands of dollars to a mortgage payment.
But it’s still a strong sellers’ market. Hunt cited one example – a fixer-upper in Berkeley listed for $1.7 million that sold within 30 hours for an all-cash price of $2.8 million.
The three-bedroom, two-bath house came on a large lot with a backyard cottage unit. The sellers wanted to close a deal quickly, and the buyers were willing to overlook the need to patch up 100-year-old plaster and update some features. “She was a cutie, but she needed some love,” Hunt said.
But real estate experts expect some cooling toward the end of the year. More interest rate hikes are expected as the Fed battles inflation. Fewer buyers are expected to venture into the high-priced market. “We are expecting prices to rise,” Nothaft said, “but slower than in the last 12 months.”
Article source: https://www.mercurynews.com/2022/05/09/economic-shocks-yet-to-strike-bay-area-home-prices