Zillow: Bay Area home values fall faster than rest of the U.S.

The value of Bay Area homes has tumbled further than anywhere else in the nation, according to a new report.

As rising mortgage rates chill the U.S. housing market, a typical single-family home in the San Jose-Sunnyvale-Santa Clara metro area fell 4.5 percent from June to July to $1.56 million, the San Jose Mercury News reported, citing a Zillow study. Home values in the San Francisco-Oakland-Berkeley metro fell 2.8 percent to $1.44 million.

Nationwide home prices fell 0.1 percent during the same period to $357,000.

The Bay Area reports the steepest declines as mortgage-rate spikes squeeze buyers out of the market, according to Jeff Tucker, a senior economist for Zillow.

“The number one reason is that it’s the most expensive place in the country,” Tucker said. “Buyers were already stretched to the breaking point.”

The decline follows a two-year home buying frenzy, as buyers during the pandemic freed from offices by remote work took advantage of historically low mortgage rates. Home values soared.

Then came runaway inflation, and a battle by the Federal Reserve in recent months to raise the cost of borrowing. Mortgage rates spiked, cooling demand and record prices.

The average interest rate for 30-year fixed home loans is between 5 percent and 6 percent – double the lowest rates during the pandemic.

The mortgage payment on a typical home in metro San Jose rose 60 percent from July 2019 to $8,371 a month, including taxes and insurance, according to the report. That’s more than double the median rent of $3,369.

The payment on a typical home in metro San Francisco rose 56 percent in the same period to $7,623. The median rent is $3,277.

The share of listings with a price cut in metro San Jose in July was 19.5 percent, from 13.5 percent in June, according to the Zillow report. In metro San Francisco, the share of reduced listings was 17.5 percent, from 12.5 percent in June.

The falling demand means more homes are staying on the market longer, boosting inventory and further driving down prices.

From June to July, home values fell 2.8 percent in Phoenix, to $470,800; 2.7 percent in Austin, Texas, to $566,533; 2.5 percent in Sacramento, to $611,287; 2.5 percent in Raleigh, North Carolina, to $457,006; and 2.5 percent in San Diego, to $894,246.

In a six-county Southern California region, home prices fell 1.3 percent during the same period.

— Dana Bartholomew

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