Is The Bay Area Housing Market Cooling Off?

The San Francisco Bay Area is well-known for its high cost of living and, more specifically, how expensive home prices are. This isn’t a new development; in fact, during the famous California Gold Rush, which began in 1848, residents of San Francisco were already complaining of how expensive things were. But, beginning with the original dotcom bubble at the turn of the millennium, the Bay Area housing market really took off, with home prices surging and never really coming down, except for the period during America’s housing market crash in the late-2000s and its aftermath.

However, with the Federal Reserve determined to rein in inflation with interest rate hikes, rising mortgage rates have been affecting housing market activity. In 2021, the second year of the pandemic, housing markets across the United States became hot, some very hot. Yet, with the constant rate hikes that have been occurring in 2022, housing markets across the country have shown signs of cooling off, some very significantly. So, the question here is: Is the Bay Area housing market cooling off?

Using data from Redfine

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covering factors such as median sale price, number of home sales, number of new listings, available for-sale inventory, median days on market a home for sale spends, sales-to-list price ratio, and the percentage of active listings with price drops, we analyzed what’s going on in the Bay Area housing market.

Read on to find out key developments unfolding in the San Francisco Bay Area housing market.

Bay Area Housing Market: Overview

Looking at the data from Redfin, the Bay Area housing market is displaying mixed signals. Like so many other housing markets during the pandemic, home prices in the Bay Area witnessed a considerable rise beginning in 2021 and carrying over into the first part of 2022.

Looking first at the state level, in June 2021, the median sale price in California overall reached an annual peak of $770,100. That was up 28.9% year-over-year, from a median sale price of $597,000 in June 2020. And then, in April 2022, the median sale price in California reached a new peak of $844,100. But since then, California’s median sale price has been on the decline, falling every single month since April 2022:

  • April 2022 – May 2022: $844,100 – $839,700 | -0.5%
  • May 2022 – June 2022: $839,700 – $812,400 | -3.3%
  • June 2022 – July 2022: $812,400 – $779,200 | -4.1%
  • July 2022 – August 2022: $779,200 – $760,300 | -2.4%
  • August 2022 – September 2022: $760,300 – $759,600 | -0.1%
  • September 2022 – October 2022: $759,600 – $754,600 | -0.7%

While, of course, homebuying is subject to seasonal influence, in past years California home prices have not experienced this kind of consecutive month-on-month decline, even in the autumn. The Bay Area housing market is quite different from the California state housing market, but it too is showing signs of shakiness when compared to the recent past.

The median sale price in the San Francisco metro area fell by 4.5% year-over-year, from $1,550,000 in October 2021 to $1,480,000 in October 2022. That contrasts sharply with the change in the median sale price from October 2020 ($1,420,000) to October 2021 ($1,550,000) in the San Francisco metro area, which amounted to a 9.2% annual increase in home prices.

However, the Bay Area housing market encompasses more than just the San Francisco metro area. As defined by the Association of Bay Area Governments, the Bay Area includes nine counties: Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, Sonoma, and San Francisco County. On top of that, the Bay Area housing market is home to some significant core cities, such as San Francisco, Oakland, and San Jose, among others. And several of these cities and other important ones in the Bay Area have experienced signs of a cooling off in their housing markets.

Bay Area Housing Market: Where Prices Are Falling

Drops in home prices in the Bay Area housing market have occurred mainly from 2021 to 2022. The city of Oakland is most notable, witnessing its median sale price decline by 10.5% year-over-year: From $950,000 in October 2021, down to $850,000 in October 2020. Berkeley experienced a similar decrease over the same one-year period, from a median sale price of $1,610,000 in October 2021, down to $1,455,000 in October 2022 — an annual decline of 9.6%. In Concord, in the northern part of the East Bay, its median sale price fell by 7.6%: From $760,000 in October 2021 to $702,500 in October 2022. And another pricey East Bay city, Fremontalso saw its home prices decline by nearly 7%: From $1,350,000 in October 2021, down to $1,257,500 in October 2022.

In terms of counties in the Bay Area housing market, San Francisco County experienced the largest year-over-year decline, 6.7%: From a median sale price of $1,525,000 in October 2021, down to $1,422,500 in October 2022. Although this median sale price is still very expensive, it is only $22,500 higher than the county’s median sale price in October 2020, when it was $1,400,000. San Mateo County also watched its home prices slide, falling from a median sale price of $1,620,000 in October 2021 to $1,528,000 in October 2022, for an annual decline of 5.7%.

Based on this data, the majority of places in the Bay Area housing market that have seen their home prices increase are located in the North Bay region, such as the cities of Novato and Napa, and counties such as Sonoma County, Marin County, and Napa County. Meanwhile, counties on the Peninsula and in the East Bay have tended to experience a decline in home prices over the last year.

Bay Area Housing Market: Inventory and Days on Market

An increase in available for-sale inventory can be an indicator of how active a housing market is. When it comes to the Bay Area housing market, the city of Fremont has experienced the largest growth — 58.1% — in its housing inventory over the last year: From 105 homes for sale in October 2021, up to 166 homes in October 2022. The Fremont housing market has also experienced a substantial increase in the number of days a home for sale spends on the market before being bought up. In October 2021, the median days on market for a home in Fremont was just 10 days, but by October 2022, it had risen by 160%, to a median of 26 days on market.

In fact, all 26 regions analyzed in this study have experienced a year-over-year increase in the number of days a home sits on the market before being bought. Seven regions have witnessed a year-over-year increase of 100% or more from October 2021 to October 2022:

  1. Fremont, CA: 160%
  2. Concord, CA: 133.3%
  3. Contra Costa County, CA: 125%
  4. San Jose, CA: 125%
  5. Hayward, CA: 107.7%
  6. Richmond, CA: 107.1%
  7. Santa Clara County, CA: 100%

Not coincidentally, many of these regions are in the Bay Area housing market have also seen their available inventory increase over the same period. As mentioned, Fremont saw the biggest increase, but there’s also the city of Gilroy, deep in the South Bay, which experienced the second largest increase in inventory: 51%, from 51 homes for sale in October 2021, up to 77 homes for sale in October 2022. At the same time, in Gilroy, the number of monthly home sales dropped by more than half (50.8%), from 61 home sales in October 2021 to only 30 home sales in October 2022.

Below is a table breaking down the 26 regions analyzed in this study by their available for-sale inventory and the change over the last year:

Sonoma County is the primary exception here, witnessing a solid tightening of available inventory year-over-year of almost 17%. Both the city of Napa and the county of Napa also experienced declines in their for-sale inventory from October 2021 to October 2022.

The Bottom Line: Is the Bay Area Housing Market Cooling Off?

In regard to the question of whether the Bay Area housing market is cooling off, the answer is that it is indeed in most places. Only five regions out of 26 in this study saw their available inventory tighten from October 2021 to October 2022. All 26 regions saw their median days on market increase year-over-year. All 26 regions also experienced a decline in their sales-to-list price ratio, meaning that the final sales price of homes in these areas are aligning with the listed price or even dipping below it.

Although 15 out of the 26 regions witnessed a one-year decline in their median sale prices, since it’s the Bay Area, home prices are still very expensive when compared to the rest of the country. Out of the 26 regions analyzed here, the city of Vallejo has the most affordable median sale price at $510,000, as of October 2022, which is down 5.4% from the previous year. Yet there still is hope for greater affordability in the Bay Area housing market in the future.

According to the Redfin data, the percentage of active listings in these 26 regions that have had their prices dropped has grown significantly. For instance, in Berkeley, only 6.7% of active listings in October 2021 had prices dropped; by October 2022, that figure surged to 28.9% of all active listings, equivalent to a year-over-year increase of 333%. And Berkeley isn’t alone in this regard. Much of the Bay Area housing market has seen active listings have their prices slashed and the percentage of price drops has grown substantially from 2021 to 2022.

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