Uncertainty continues to plague the Bay Area real estate market in the midst of another federal interest rate hike and an ongoing stock market slump.
Although sales are cooling across the region, market analysts don’t think we’re in a buyer’s market locally — yet. “We’re obviously going through some sort of market correction,” said Compass chief market analyst Patrick Carlisle. “… It may be the market will slow down and adjust, but there’s no economic indications now that there will be anything like the crash we saw in 2008.”
Instead, the term “balanced market” is being tossed around, a new spin on the phenomenon of buyers (slowly, cautiously) earning back power they haven’t had for years. Kenneth Hogan, an East Bay real estate agent for two decades, said he’s had some buyers pull out of the market entirely because of stock market declines, but he’s also had clients take advantage of the current climate of decreased competition. “It used to be a free-for-all, but not anymore,” Hogan said. “Buyers are starting to get their turn at it. Buyers are able to negotiate more and ask for things there’s no way they would have gotten before.”
In a recent survey of more than 1,000 real estate agents from real estate tech company HomeLight, 72% of agents reported an increase in contingencies, something buyers often waive in the Bay Area in order to present a competitive offer. Simultaneously, 86% of agents said sellers have, since the “pandemic home buying boom,” become overconfident when listing property.
“There’s a weird feeling of it being a stand-off,” said Zillow senior economist Jeff Tucker. “The flow of new listings dropped 18% from July to August. That suggests to me that sellers were digging in their heels. They’re thinking, ‘I don’t have to sell so I’m just going to wait.’”
Median home prices are up 6% nationwide in August, while San Francisco and Oakland were the only two metro areas where prices fell year-over-year, according to Redfin’s most recent housing report. “Out of everywhere,” Tucker said, the Bay Area has emerged as something approaching a buyer’s market. “I think the one thing holding me back from saying that [outright] is buyers still don’t have a lot of options to choose from. Inventory is still low.”
Home values are down 3.4% since July in the Bay Area, though they’re up 25.6% since August 2019, according to Zillow’s most recent market report. “The market has cooled down dramatically,” Tucker said. “The month-over-month decline is the most of any major metro in August. That’s a major indication to me that home buyers have pulled back in the Bay Area in a big way.”
Carlisle, meanwhile, is a bit more bearish, and believes it’s too early to say we’ve come to a balanced market. “We’re still in a period of adjustment,” he said. “We have to see how many of these economic developments get worse or better.”
Recent Compass data showed that the number of home sales in the Bay Area are down 32% year over year, but Carlisle said 2021 was an “overheated market.” August is typically a slower period before a spike in September, and the data won’t show whether that cyclical trend holds true until next month.
“We’re in a place where buyers, sellers and agents are waiting to see how things shake out,” Carlisle said. “It’s an uncertain market and we’re trying to figure out what’s coming next.”
Carlisle cautioned against the rosy picture of the market balancing in the Bay Area. “The problem is even with the power swinging back [to buyers], they still have to deal with interest rates that are double what they were a year ago, and stock market portfolios are down 20%,” he said. “There’s nothing yet to celebrate. This wasn’t Christmas in July.”