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

SIGNS OF ECONOMIC STRENGTH AMID SLOWING MARKET

While the Bay Area housing market slowed during the third quarter, the regional housing market fared better than some parts of thecountry. Despite curtailed hiring in the tech sector,the Bay Area labor market remained strong with elevated job openings throughout most industries. The unemployment rate fell to 2.6%, matching the low prior to the onset ofthe pandemic in early 2020. Wage growth also remained elevated, helping to offset some of the increase in housing costs from rising mortgage rates and recent price gains. The strength of the regional economy remains key to supporting demand for housing.

DEMAND REMAINS STRONG,ESPECIALLY AT LOWER END

Demand for housing remained elevated, despitehigher mortgage rates and concerns of aconsumer slowdown. Sales of the most affordable homes were on par with the second quarter, underscoring buyer demand in the face of rising mortgage rates. Similarly, sales of homes priced between $1 million and $1.25 million slowed only slightly. The largest decreases in sales occurred in the upper price tiers, particularly homes priced greater than $3.5 million where sales volume fell by roughly half from the second quarter.

For many buyers in this price range, losses in the stock market, still-closed IPO window and rising business expenses pushed potential buyers to the sidelines, at least temporarily.

BUYER COMPETITION EASES

Buyer competition slowed despite the persistent demand for affordable housing options. The higher mortgage rates as well as economic factors have sidelined some potential homebuyers, decreasing the level of competition. The share of homes sold above the asking price fell to 43%, the lowest share in two years. The final closing price was well above the list price for many of those homes, highlighting that well-positioned homes will still attract multiple offers. Homes priced in the $2 million to $3 million range took longer to sell, on average, than earlier in the year. Homes in this range sold very quickly in the first few months of the year, averaging less than two weeks on the market. By September,the average sale took nearly a month, more than double the amount of time.

LOOKING AHEAD

Housing affordability will remain an issue for entrants to the market and available inventory may remain low relative to historical levels. Inventory constraints will remain, particularly as existing homeowners would take out a mortgage at much higher rates than their current mortgage. Should the Bay Area escape a  ecession and substantial job loss, demand for single family homes and condos should persist throughout most price ranges.

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