Bay Area home prices saw another month of double-digit increases this spring — with the biggest bump coming in Santa Clara County.
But experts are waiting for high mortgage interest rates to pour a little cold water on that heat — a shift some real estate agents say is already happening.
Throughout the nine-county Bay Area, the median sales price of an existing single-family home increased 13% — hitting $1.3 million, according to the latest data from CoreLogic and DQNews. The median price in Santa Clara County reached $1.8 million in April, up 23% from a year ago. Alameda County wasn’t far behind with a 20% increase.
“As the increase in home prices showed, the demand is still strong,” said Selma Hepp, deputy chief economist for CoreLogic. “It’s actually really strong in the sense that it’s a lot of over-bidding still, most homes selling over the asking price and home price appreciation still continuing to trend at double-digit rates.”
Alameda County remains pricey, particularly in desirable cities such as Oakland and Berkeley, said East Bay realtor Karyn Selby with Keller Williams Realty. And the market continues to see demand as people migrate from more expensive areas in San Francisco and the Peninsula to pursue remote-work lifestyles.
Contra Costa County, traditionally the most affordable of the core Bay Area counties, had the slowest year-over-year growth, but still saw its median price inch closer to $1 million in April. Median prices hit $2 million in Marin and San Mateo counties, and San Francisco wasn’t far behind.
But rising interest rates have put a damper on the buying frenzy, Selby said. The rate for a 30-year fixed mortgage jumped from 3.76% in early March to 5.1% at the end of May, according to Freddie Mac. Rates have softened slightly in recent weeks, but remain far above where they were a year ago when the average 30-year rate was below 3%.
Some people saw a large chunk of their buying budget disappear as interest rates climbed, and now are pausing their search and re-evaluating, Selby said. The increase has especially impacted buyers looking for their first home (likely something priced between $700,000 and $1 million), she said.
That means while today’s market is still “super competitive,” it’s not quite as crazy as it was in March and April, she said.
“Maybe two months ago, a house would get 15 offers and go 30-40% over the list price,” she said. “Now it’s sort of flatlined a little bit. So instead of 15 offers, they may be getting eight. And it’s going more like 20-30% over list price.”
Prices likely will continue to increase in future months, but perhaps more slowly, Selby said. Despite the market shift, she doesn’t recommend delaying a home purchase.
“The prices are never going to crash, certainly like they did in 2008, 2009,” she said. “And the interest rates are probably going to go up again this year.”
Santa Clara County already is seeing a change, said Mike Gaines, an agent with Compass Real Estate. A few months ago, a seller could list virtually anything and it would get multiple offers. Now, that’s not always the case, he said. Some sellers are pulling their homes off the market because they aren’t getting as much interest as they’d hoped. Agents are reporting slow open houses.
Gloria Othon is feeling the cooling market first hand. Othon, 61, poured $115,000 into a year-long project to remodel the bathrooms and kitchen of her San Jose home, re-do the landscaping, buy a new water heater and other appliances, and replace the roof. She hoped the renovations would bump up the sale price.
Othon and her husband bought the house in San Jose’s Berryessa neighborhood in 1998 for $350,000, but their children are grown now and they no longer need so much space.
Othon listed the house last week for $1.788 million, hoping offers would pour in. But so far, it’s been crickets. She worries she waited too long to take advantage of the hot housing market. And if the house doesn’t sell, she and her husband can’t afford to downsize by buying a smaller house or a condo.
“I’m really scared,” she said. “I feel like I might have missed it, and what do I do now?”
In addition to high interest rates, inventory also is up, which also could lead to lower prices, Gaines said. San Jose’s Willow Glen neighborhood has 80 homes for sale now — up 60% from two months ago, Gaines said. Throughout Silicon Valley, there are 1,700 homes listed — up from 1,000 two months ago.
“I think you’re going to see some leveling off,” he said, “and I think you’re also going to see some reductions.”
The broader turmoil in the economy, between inflation, gas prices, stock market volatility, the crisis in Ukraine and more, also may be prompting more buyers to pause their home search, Selby said. But that doesn’t change the fact that Bay Area prices are high, and likely to stay that way.
“All these things come into play,” Selby said, “but it’s still a crazy, crazy market.”