From the Golden Gate Sotheby’s Market Report…

HOUSING MARKET OUTPERFORMS

The housing market continued to outperform the broader economy in the SF Bay Area as the spreading Delta variant dampened consumer and business optimism. A growing number of corporate entities delayed reopening offices in the region and extended business travel restrictions. With remote working options extended for many SF Bay Area workers, the heightened demand for houses with extra rooms for home offices as well as access to outdoor space should persist into next year.

SALES DIP BUT LOW INVENTORY AFFECTS PENT-UP DEMAND

Closed sales decreased for the second-consecutive month from the June peak. In August, 5,828 homes sold throughout the region, 2.4% lower than July. While the modest slowdown in sales tallies does not indicate a drop-off in buyer demand, record-high pricing in many cities continued to weigh on some potential buyers. The increasing cost of ownership and size of down payments deterred some first-time homebuyers, adding to the pent-up demand for homes.

Additionally, lack of suitable inventory curtailed potential trade-up households. Sales activity in the most affordable segments increased in August, bucking the overall trend of slowing transactions and highlighting continued elevated demand for affordable single family homes in the region. Sales of homes priced less than $1.25 million increased by 2.5% in August. Listed homes in this price range also sold quickly, spending less than 24 days on the market on average. Within this price tier, counties with the strongest rebound in August included Marin, Napa and Sonoma.

Some amount of buyer fatigue may be growing in the mid-priced tiers, with buyers facing highly competitive bidding situations in most neighborhoods. Many listings received multiple offers soon after coming to market and the average days on market decreased in the mid-priced segment. The number of sales closed fell by 6% in the $1.25 to $2.5 million range, while sales dropped by 11% in the $2.5 to 3.5 million range.

LOOKING AHEAD

The volatile economy and rising rate of infections will continue to create uncertainty in the SF Bay Area even as the housing market closes out the remainder of the year at an elevated pace. Thus far during the pandemic, housing demand has not been dampened and there is little reason to believe that this will change in the coming months. The low mortgage rate environment is likely to persist, which will help new entrants to the most expensive housing market in the country.

While affordability concerns will remain throughout the region, elevated demand for quality single family homes will drive the housing market into 2022.

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