Many U.S. housing markets are witnessing a slowdown in response to rising mortgage rates and woes on Wall Street , and northern California has seen the biggest impact, according to a Redfin report Friday.
Out of the top 10 markets that have cooled the fastest over the three months from February to May, five were in northern California, including San Jose, Oakland, San Francisco, Sacramento and Stockton—and three of those five in the Bay Area, Redfin said.
The Seattle-based brokerage tracks the housing markets across 100 most populous U.S. metros. The ranking of market cooldown is based on several factors, such as year-over-year changes in prices, supply, pending sales, sale-to-list ratio and the average time it takes a home to sell. Data was collected from February through May.
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“The housing market has changed drastically in the last month because higher rates make homes even more expensive than they used to be,” Joanna Rose, a San Francisco Redfin agent, said in the report. “At the same time, fewer people can afford pricey homes because of the volatile stock market.”
San Jose had the steepest decline in homebuyer demand, resulting in an inventory pileup by the end of May. The number of homes for sale was 10% higher compared to May 2021, while in February, supply was down 43%, according to Redfin.
Additionally, pending sales across the metro were down 21.3%. The share of homes sold in two weeks was down 5% in May, compared to a 22% increase in February, the report said.
Outside of northern California, other markets that have cooled faster than anywhere else in the U.S. include Seattle; Boise, Idaho; Denver;San Diego, California; and Tacoma, Washington.
Another sign of an imminent market cooldown in the San Francisco Bay Area is that price growth plunged in June, according to a separate report released by Compass on Thursday.
The median sales price in this area rose about 18% annually in April, and dropped to just above 10% in May. Last month, the year-over-year price growth fell to a mere 2%-3%, according to Compass.
“The impacts of this year’s severe economic headwinds—soaring inflation and interest rates, stock market declines, fear of recession—on Bay Area real estate markets are speeding up,” Patrick Carlisle, chief market analyst for Compass San Francisco Bay Area, said in the report.