SAN JOSE, California -- Looking to buy a home in the Bay Area? The odds of scoring a deal could be tipping in your favor.
For the first time in over a decade, homes in the region are selling, on average, for less than the asking prices, according to data from real estate brokerage Redfin.
The milestone reflects a slowdown in the Bay Area’s notoriously scorching housing market as rising mortgage rates squeeze out many would-be buyers and hammer prices. This week, the average rate on a typical 30-year home loan hit 6.3%, double the historic lows during most of the pandemic — when buyers rushed into the market in droves to take advantage of the cheaper mortgages. The higher rate is boosting monthly home payments, sometimes by thousands of dollars.
“This time last year, you were absolutely enjoying that market, but it took a pretty sharp turn,” said Matt Rubenstein, a Contra Costa County real estate agent.
Less competition means those who can still afford to buy are gaining the upper hand in price negotiations.
Redfin’s “sales-to-list ratio,” a key metric comparing sales and asking prices, is bearing that out. A sales-to-list ratio above 100% means home prices are selling higher than asking prices. A ratio under 100% means home prices are selling lower.
Across the core Bay Area, the sales-to-list ratio has remained between 98% and 100% over the past three months. That means sales prices hovered around 1% to 2% below asking prices on average during that period. It’s the first time that’s happened since early 2012 when Redfin began tracking the data.
Just a year ago, in May 2022, as home prices peaked at record highs, the sales-to-list ratio reached 114% in the San Jose metro area, 112% in the Oakland metro and 111% in the San Francisco metro.
The shift in the market forced one of Rubenstein’s clients to slash the asking price of a suburban Lafayette home from $2 million to $1.7 million after it sat unsold for three straight weeks.
The main issue with the property is a large neighboring church parking lot that fills up on weekends, Rubenstein said. A year ago, during the height of the pandemic homebuying frenzy, a bidding war might have erupted. But now buyers have the luxury of being more choosey.
Homes across the Bay Area are staying on the market much longer. In Contra Costa County, properties are normally sticking on the market for 45 days, up from just 12 this time last year, according to Redfin.
Homes in good condition — with well-kept yards and modern kitchens and bathrooms — are still in demand, especially if they’re in desirable neighborhoods with good schools, Rubenstein said. “There are homes sitting on the market longer and taking reductions, but I’m also seeing multiple offers and houses going over,” he said.
As of Feb. 5, the median price for all homes — including single-family houses, condos and townhomes — was $1.34 million in San Mateo County, $1.29 million in Santa Clara County, $1.17 million in San Francisco County, $894,000 in Alameda County and $671,000 in Contra Costa County, according to Redfin.
Prices across the five core Bay Area counties are down between about 5% and 10% compared to this time last year, and around 25% to 35% under their all-time high in May.
This winter, San Jose real estate agent Lynsie Gridley said she saw sellers cut asking prices by up to 5% in December and January — typically the slowest months for home purchases. The market ground to a halt during last month’s severe storms. But heading into the traditionally busier spring home buying season, house hunters are starting to return, Gridley said.
“We are seeing more people at the showings, and more offers coming to the table, but they’re not as substantially over list prices as they were a year ago,” she said.
Daryl Fairweather, Redfin’s chief economist, said that after years of having one of the tightest real estate markets in the country, the Bay Area could be entering a period of more stagnant price growth, even as home values remain high. In addition to the rising mortgage rates, she cited an exodus out of the region, as many local employers have embraced remote work, for potentially tamping down future demand.
Fairweather also said recent state laws aimed at spurring more home construction could help prevent prices from spiking down the road.
“We may see this new normal where the San Francisco Bay Area looks more like the rest of the country,” she said.
For Melissa Casserly, 36, and her husband, who rent in Santa Clara, the region’s still-astronomical home prices could eventually convince them to leave the Bay Area. The couple is thinking of buying a home in Southern California, where they have family and where real estate prices are more affordable.
“We hear what homes sell for in our neighborhood and our parents’ neighborhood — it’s just absolutely insane,” Casserly said.
