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Industry News
Bay Area Home Prices are 28% Higher Than During the Height of the Pandemic Real Estate Rush.
The Bay Area's population is shrinking but local home prices remain sky-high because the actual number of homes listed for sale has dropped to a 20-year low.
The number of new listings tracked over a 12-month rolling basis fell below 80,000 in the 11-county greater Bay Area (which includes Santa Cruz and Monterey counties). This is down from a pandemic high of more than 100,000 home listings in mid-2021 and an all-time high of more than 180,000 in 2006.
The lack of homes available for sale means that even if overall demand for housing remains moderated, there is still more than enough competition among buyers for what listings are available — which means Bay Area homes will remain expensive.
So far in 2023, there are so few listings that it’s triggering competition among buyers and resulting in multiple offers over asking. In fact, home prices today are 28% higher than when the pandemic first upended the local real estate market.
Driving the lack of listing activity is the “mortgage lock-in effect”: When mortgage rates are high, property owners, who likely have a lower mortgage rate, are hesitant to sell and take on a new mortgage.
According to Black Knight, roughly 86% of US homeowners with mortgages have an interest rate of 5% or lower, while half of all mortgages have an interest rate of 3.5% or lower, both well below today's current weekly average level of 7%.
In fact, listings remain low across the country. According to Zillow, there were 23% fewer new listings this May 2023 compared to May 2022. And Redfin reports there are 39% fewer homes listed for sale nationwide, compared to pre-pandemic offerings. Which is driving median U.S. sale price up 44%.
Why the increase in sales price? The answer is simple economics. Freddie Mac reports the US housing market faces a demand shortfall of roughly 3.8 million units of housing. And because we only create an average of 1.6M homes per year, it will be some time before supply and demand come into balance (assuming they ever do). Until then, expect scarcity will continue to drive US home prices higher.
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