If you feel like only the Bay Area’s wealthiest can afford to buy a home right now, you’re not alone.
Affluent buyers dominated the market in June as the median home sale price in the nine-county Bay Area in June climbed to $1.4 million — a 6% increase from the same time last year.
“The reason we’re seeing these increases in median prices is because we’re seeing more sales in higher-priced areas,” said Oscar Wei, senior economist for the California Association of Realtors, which provided the data.
The median sales price for a single-family home was $1.4 million in Alameda County, $1.7 million in San Francisco, $2.1 million in San Mateo County and $2 million in Santa Clara County, and $903,000 in Contra Costa County.
High-value home sales outpaced the broader market, especially in the South Bay, according to a recent report by real estate brokerage Compass. In San Mateo County, home sales rose 11.5% year over year, while homes selling for more than $5 million jumped 29%. Likewise, in Santa Clara County, sales overall increased 18.5% from 2023, while sales of homes for more than $5 million climbed a stunning 63%.
Chalk it up to well-performing tech stocks, says Hadrien Trempont, a real estate agent with Intero based in Menlo Park.
“When the financial markets do well, we see people pulling money from there and putting it into real estate,” Trempont said. The S&P 500 rose by nearly 15% over the first half of the year, while the tech-heavy Nasdaq climbed by 18%.
Meanwhile, buyers of lower-valued properties — who may be coming in with smaller down payments — may be more influenced by interest rates.
That was the case for George Martines. He started looking for two-bedroom condos around San Jose in January, but soon realized there were few options within his budget of about $500,000.
George Martines, 50, at his one-bedroom condominium, where he lives with his border collie Australian mix, Lani, in San Jose, on Friday, July 26, 2024. (Dai Sugano/Bay Area News Group)
“I was asking myself, ‘Do I rent for another year and let things calm down?’” he said. “Or do I bite the bullet and try to find something?”
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Martines decided instead to look at one-bedrooms, which fell into his price range. This spring, he found a spot on the East Side of San Jose that had been on the market for 60 days, asking $500,000. His real estate agent looked at recent sales within the building, and they decided to offer just $450,000.
“It was a tough market,” Martines said. “But I’m happy that it worked out — I’m putting my money into a place I’m living in, money that’s ultimately going to come back to me.”
Interest rates, while improving, haven’t been in buyers’ favor this summer. During the first week of May, interest rates on a 30-year mortgage hit a 6-month high of 7.22%, according to data from Freddie Mac. Since then, they have come back down to 6.78%.
“Higher interest rates in May may have caused some buyers in June to hold back on purchases or negotiate the sales price,” Wei said. “Now, with interest rates decreasing from June to July, that might motivate more people to get back into the market, or offer higher prices.”
Even just a few points can add hundreds of dollars to a monthly payment. The buyer of a median-priced home in the Bay Area with a 20% down payment would have a monthly mortgage payment of $7,618 had they bought in the beginning of May, versus $7,287 if they were to buy now.
High interest rates have also impacted inventory across the Bay Area for much of the last year. With many buyers purchasing or refinancing at record-low interest rates during the pandemic, there’s little motivation for them to list their homes right now.
“Sellers are concerned,” Yost said. “If they sell, where will they go? What will they replace the property with? So instead, they’re staying put.”
Some sellers, though, can’t wait any longer and are deciding to list anyway — which could help to alleviate inventory in the second half of the year. In June, the number of new active listings increased 7.7% for the nine-county Bay Area from last year, with new listings in Alameda County increasing the most, at 21%, followed by Santa Clara County, at 15%, the real estate association data showed.
Even with those new homes coming onto the market, expect fierce competition during the later half of the summer and early fall, agents said.
“Homes are going quickly,” Trempont said. “The more serious buyers are out right now.”
The most competitive segment in the market is for single-family starter homes, agents said.
Suzanne Yost, an agent based in Los Gatos, recently worked with a couple looking for a home in Cupertino that submitted four offers on different homes before one was accepted. On one of the earlier offers, they were just one of 40 bidders.
East Bay real estate agent Sunny Wong said that he works with many buyers priced out of San Francisco and the South Bay — where even 1,200-square-foot, two-bedroom houses regularly go for over $1 million — who hope to find something closer to $800,000 in Hayward or San Leandro.
“Many people are being priced out,” Wong said.