After high interest rates drove the Bay Area housing market into a deep freeze last year, bringing home sales to the lowest level in 15 years, there are signs in the first months of 2024 that the market is beginning to thaw.
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Sales in January ticked up somewhat year-over-year across the nine-county Bay Area, rising 6.2% as buyers resigned themselves to higher interest rates and returned to the market, according to data from the California Association of Realtors.
“We’re seeing inventory trickle back on, and buyers are coming back, too,” said Connie Miller, a real estate agent based in Los Altos.
A drop in mortgage rates has made home ownership more attainable for some buyers. The rate for a 30-year fixed-rate mortgage, which was up slightly to 6.9% as of the last week of February, is still much lower than its peak of 7.79% in November.
“Last fall, there was uncertainty about what interest rates would be doing,” Miller said. “Now, even though rates aren’t as fabulous as a year ago, they have stabilized.”
Increased buyer interest has put some upward pressure on prices. The median price of a home in the Bay Area rose 10.6% between January 2023 and January 2024 to $1.1 million. In the South Bay, median prices swelled even more dramatically, hitting $1.98 million in San Mateo County, a 21.5% jump from last year, and $1.71 million in Santa Clara County, an 11.8% increase. The median home price hit $1.1 million in Alameda County, $770,000 in Contra Costa County and $1.5 million in San Francisco.
Inventory in the Bay is startlingly low, as homeowners with 3% pandemic-era interest rates are still reluctant to trade out their home for a new one.
“Everyone who refinanced isn’t going to give up their mortgage unless they have to,” said Jim Hamilton, president of the Silicon Valley Association of Realtors.
With so many buyers competing over such limited properties, real estate agents are seeing bidding wars. This month, one of Miller’s buyers, an Nvidia employee, used increasing stock value to expand their budget from $3.5 million to $4.5 million. They wrote an offer on a home they loved — but as it turns out, theirs was just one of 21 bids. The seller ended up going with an all-cash offer.
Realtor Judith Richardson, center, hosts an open house event on Sunday, Feb. 25, 2024, in Oakland, Calif. The three bedroom home along 62nd Street is listed at $1,495,000. (Aric Crabb/Bay Area News Group)
“There’s all these buyers who have all of this money, but there’s nothing to buy,” Miller said.
Homes are getting snapped up fast, especially in Santa Clara County, where the median time on the market in January was just 11 days, compared to 31 days across the nine-county Bay Area.
Open houses are also seeing more foot traffic, agents said. This past Saturday, Catherine Peterson was one of the 70 people who stopped by an open house for a three-bedroom, one-bath home in Oakland’s leafy Rockridge neighborhood. The house was listed for $1.5 million.
Peterson, a lawyer, and her husband, a tech worker, made several offers on homes at the start of 2023, when rates were around 6%, but they were outbid each time. Now, with interest rates a percentage point higher, they’ve had to reduce their budget by nearly a third.
“The level at which we would need to like a house to buy now is different,” Peterson said.
Visitors tour a home for sale along 62nd Street during an open house event on Sunday, Feb. 25, 2024, in Oakland, Calif. The three bedroom home is listed at $1,495,000. (Aric Crabb/Bay Area News Group)
Shannon and Matt Gustafson, who also stopped by the open house Saturday, have dealt with similar frustrations over the lack of inventory. In October, seeking out a more walkable environment for their 3-year old to grow up in, the couple sold their home in San Jose and moved to a rental in central Berkeley.
The Gustafsons have equity from their previous home sale — they built a mother-in-law cottage in the backyard and sold the property for $1.3 million, double the price they’d bought at 10 years earlier. Still, they prefer to rent until interest rates cool down and more options are available.
“We are happy to wait until the market is better,” Shannon said.
Real estate agents predict that inventory will increase this spring. Already in January, new active listings across California were up for the first time in 19 months, according to CAR data.
“Inventory has ticked up a little bit, which is typical of a spring market,” Hamilton said, “but nothing to where it needs to be to take that pressure off the market.”