From the Golden Gate Sotheby’s Bay Area Market Report…

STRONG ECONOMY, SLOWING MARKET

The SF Bay Area housing market slowed from last year’s record-setting pace, even as some pockets of resilience remain. The elevated pace of inflation, lackluster stock market and rise in announced tech firm layoffs have dampened some consumer optimism, yet the overall economy remained strong. The regional unemployment rate remained in the mid-2% range, with labor shortages throughout a range of industries. The strong labor market as well as high inflation have led to wage increases as well, helping some households to offset the rising cost of housing in the SF Bay Area.

Monthly sales slowed further in October, with roughly 3,400 homes sold in the region, a decrease of 13% from September. While sales are off from the record-breaking pace of last year, the monthly sales trend was close to 2019 levels. In October, counties with the largest decreases in closed transactions included Napa and Santa Cruz. Bucking the trend, sales increased in Marin and San Francisco.

HIGHER-PRICED HOMES LESS AFFECTED BY SALES DECLINE

After underperforming for several months, sales of higher-priced homes fared better than mid-priced homes. Though sales were down overall for the month, the drop in sales of homes priced between $2.5 million and $3.5 million and greater than $5 million slowed by the smallest amount compared to other pricing tiers.

PRICES FALL FROM SPRING PEAKS

The regional median price fell slightly, by 1% in October, to $1.215 million. Pricing throughout all sizes of homes has declined since the record-breaking levels during the spring, but have also held up relatively well if compared with one year ago. Since the peak pricing in early 2022, the median price has decreased by roughly 18%. A portion of the decline can be attributed to seasonal factors as purchase activity slows following the summer months, but higher mortgage rates have also dampened some buyer demand. Additionally, while the drop in pricing is substantial, similar pricing declines were produced in several cities throughout the U.S.

LOOKING AHEAD

In spite of headwinds, the SF Bay Area economy is fairly strong and a return to the office for more companies will help to reverse the out-migration of households in recent years. Potential buyers will face multiple options, leading to less competition but also a healthier market overall. Purchase activity may be somewhat volatile in the coming months, particularly if mortgage rates rise further, but demand for homes will persist

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