The beleaguered Bay Area housing market is showing few signs of a turnaround. Home prices are falling faster here than anywhere else in California, a new report shows, and real estate experts expect them to continue tumbling well into 2023.
Tech layoffs, recession fears and a volatile stock market have all played a part in tamping down prices since the middle of last year, battering home values that soared to record highs amid a pandemic buying boom.
The biggest factor cooling the region’s once-scorching housing market? Higher mortgage rates. Monthly home payments have spiked, sometimes by thousands of dollars, squeezing out many would-be buyers.
“There’s still buyers out there, but they have to have some intestinal fortitude to buy in this market,” said Jeff LaMont a real estate broker with Coldwell Banker Realty in Burlingame.
The median price of existing single-family homes in the Bay Area was $1.08 million in December, according to the latest report from the California Association of Realtors. That’s an 11.5% reduction from November and a 9.6% drop from December 2021 — both the largest declines of any region in the state.
One reason the Bay Area saw the largest median price is a sharp decline in high-end home sales that may be driven by uncertainty among well-paid tech workers, who have lost jobs in droves, said Oscar Wei, a senior economist with the Association of Realtors.
The pain continues. On Friday, Mountain View-based Google announced it was laying off 12,000 employees, though it wasn’t immediately known how many of those would be in the region.
Another reason: Bay Area home prices climbed higher than anywhere else in California last year, so they’ve had the longest way to fall.
Last year “just got really bumpy real quick,” said Janine Hunt, an agent with Red Oak Realty in Oakland. “We knew it was coming. What goes up must come down.”
Despite the slowdown, December’s median home price was 19% higher than in December 2019, meaning prices still aren’t approaching pre-COVID levels.
Looking ahead, the association forecasts California’s annual median home price — coming in at $822,150 for 2022 — to drop 8% over this year. Wei said he expects the Bay Area to follow a similar trend as current challenges facing the local real estate market are expected to persist. A big, influential question is what happens to mortgage interest rates.
“With interest rates seeming to be softening a little bit, there’s a chance we might do a little bit more than what we projected,” Wei said.
Last week, the average rate on a typical 30-year-fixed mortgage was around 6.2%. That’s down from over 7% in November, but almost double the historic-low rates from a year ago.
The higher rates have come as the Federal Reserve raised the cost of borrowing to slow inflation. The central bank is expected to keep borrowing costs at around current levels well into 2023. For many buyers, that means even as home prices come down, the actual cost of homeownership has become more expensive.
The typical monthly payment on a $1 million home in the Bay …read more
Source:: The Mercury News – Entertainment