I am pleased to share with you our latest Market Report for the San Francisco Bay Area. The report begins with economic and real estate commentary presented in partnership with the Rosen Consulting Group (RCG). For the statistical report of the regional housing market, we look at the ten counties associated with the SF Bay Area, focusing primarily on detached single-family homes, with added coverage of the significant condominium market in San Francisco. Enjoy the information and insight provided in the report and I look forward to discussing the market with you.
BUYERS ADJUST TO NEW NORMAL
The regional economy and housing market continued to forge ahead despite headwinds. While the further rise in mortgage rates constrains affordability for some buyers, signs continue to emerge that potential buyers are adjusting to the new normal of higher rates.
The SF Bay Area economy continued to gain strength, with the unemployment rate still in the mid-3% range. A normalization of international migration to the region has added to housing demand. Though the SF Bay Area housing market is resilient, tragic geopolitical events may trigger new worries for housing demand should ripple effects such as volatile equity markets and higher inflation take hold.
HIGHEST PRICE TIERS SEE LARGEST DECLINES
Though sales fell throughout all price tiers, the largest drops were at the upper ranges. Sales
of homes priced between $2.5 million and $3.5 million dropped by 13%, while sales greater than $3.5 million fell by 20% from the second quarter. Once again, Marin and San Francisco counties led the way with the largest drop in sales within the highest-priced tiers. On the positive front, sales within the $1 million to $2 million range were flat to slightly higher in Alameda, San Mateo and Santa Cruz counties.
NUMBER OF HOMES FOR SALE SHOWS STEADY INCREASE
Since early in the year, for-sale listings steadily climbed higher. By the end of the third quarter, nearly 5,600 homes were available, an increase of 20% from the second quarter.
The most substantial increases in for-sale inventory occurred in Alameda, Marin and San Francisco counties. Despite the uptick throughout the area, available listings are still low relative to recent history with many homeowners unwilling to sell their current home and take on a new mortgage at today’s rates.
With very few homes available for sale, it would take less than two months at the current pace of sales to absorb all of the for-sale houses in the SF Bay Area.
Homes took slightly more time to sell during the third quarter, with the average days on market increasing each month. However, in some counties homes sold more quickly in the third quarter than the previous quarter. In Alameda, Contra Costa, Solano and Sonoma counties, the average sale took less time to close than in the second quarter. The largest increase in days on market was in Marin County, where homes took more than a month to sell on average.
The low levels of inventory will continue to limit sales activity while providing some support to home values. With few homes available, buyers will continue to hone in on prime neighborhoods and a significant share of homes may sell above the list price. Higher mortgage rates will continue to constrain potential trade-up buyers for the foreseeable future. While employment growth and income gains should continue to support housing demand throughout the region, the potential for slower market conditions through the end of the year remains.