From the Golden Gate Sotheby’s Bay Area Market Report…
BUYER ACTIVITY POSITIVE AMID SEASONAL SLOWING
Following a strong October, the SF Bay Area housing market slowed somewhat in November. Seasonal trends typically take hold this time of year, leading to fewer sales and listings remaining on the market for longer. Even though the average 30-year fixed mortgage rate increased by roughly 70 basis points in November, buyer activity remained positive. The regional economy remained strong even as job creation slowed modestly. With an unemployment in the low-4% range, the labor market is tight for most industries. As more tech workers are required to return to the office, and SF Bay Area commute times worsen, many potential home buyers focused on inner SF Bay Area cities
During November, more than 3,200 homes sold throughout the SF Bay Area. As is typical for November, sales activity slowed from October. However, sales were 17% higher than one year ago, underscoring the deep demand for housing and also that buyers have acclimated to current mortgage rates. Sales increased from 2023 in all SF Bay Area counties, with the largest increases recorded in Santa Clara and Santa Cruz counties. In Santa Clara and Santa Cruz counties, sales increased the most from the last year in the $3.5 to $5 million price range. Overall, sales activity in inner SF Bay Area neighborhoods continued to outperform suburbs farthest from job centers. This highlights the continued focus by buyers on proximity to workplaces as more firms require employees to return to offices and traffic congestion increases.
LOWER PRICE TIERS AFFECTED BY MORTGAGE RATES
Higher mortgage rates typically have a greater impact on sales of the most affordable homes and, while sales of homes priced less than $1 million increased from a year ago, it was at a much slower pace than other price tiers. Compared with a year ago, sales increased by nearly 40% for homes priced between $2.5 and $3.5 million, by more than 60% for homes between $3.5 and $5 million, and by more than 50% for homes priced greater than $5 million. The strong returns from the stock market and broad strength in the regional economy helped support the growing number of sales in the upper price tiers.
FEWER HOMES AVAILABLE
For-sale inventory fell below the 5,000 home level in November as fewer new listings came onto the market. Since the peak in September, the number of available homes across the region fell significantly, reaching the lowest level since March. During the last two months, for-sale inventory decreased by roughly 40% in Alameda, Marin, San Francisco, San Mateo and Santa Clara counties. Though listings are not yet to the record low levels of a few years ago, potential buyers are still faced with few options, particularly in prime neighborhoods.
LOW INVENTORY PROPS UP BUYER COMPETITION
With available homes still somewhat limited, buyer competition stayed elevated. The share of sales that closed above the list price decreased slightly but remained greater than 51%. Again underscoring the stronger buyer demand for homes closer to employment clusters, more than 60% of homes sold at a premium in Alameda, San Mateo and Santa Clara counties. The share exceeded 70% in San Francisco, the highest in the region. In each of these four counties, homes that sold for more than the list price closed on average at a 10% or higher premium. In another sign that demand for higher priced homes has returned, roughly 60% of homes priced between $2.5 and $5 million sold for more than the list price in November.
OVERALL DEMAND STAYS STRONG
The housing market remained positive even as sales slowed heading into the end of the year. Overall, buyer demand remained strong, particularly for homes close to employment centers and those priced greater than $2.5 million.
LOOKING AHEAD
In the coming year, volatility in the national economy, inflation, and mortgage rates may impact local housing conditions. In particular, there is risk of further increases in mortgage rates as we have seen in the past month. Despite the potential headwinds, buyer demand should remain elevated, potentially leading to price gains in many cities over the next year.
