With mortgage rates approaching 7 percent, a cooling trend in the Bay Area housing market has caused a steep drop in the number of homes selling above their asking price, the San Francisco Chronicle reported. Data indicate the trend stretches from San Francisco to San Jose.
In Greater San Francisco, which includes Oakland and Berkeley, 60 percent of homes sold above asking price in August, according to Zillow, a 20 percent year-over-year drop.
In Greater San Jose, 38 percent of homes sold above list price, a nearly 46 percent drop from the same month last year.
In San Francisco, where the typical home sells for $1.7 million, listings are staying on the market longer than last year, with fewer offers.
Before mortgage rates began to rise in January, bidding wars resulted in a fusillade of offers that could drive prices upwards of $100,000. The few offers now resemble pot shots in the woods.
“Now, what you’re seeing is one or two offers on a property and nobody willing to really compete against each other,” Kevin Birmingham, founder of Park North Real Estate and a past president of the San Francisco Association of Realtors, told the Chronicle.
“If you’re trying to stretch (buyers) up in price, they’re out.”
Low inventory still makes the Bay Area housing market among the most competitive in the nation. But rocketing mortgage rates have cut out many would-be homebuyers, giving the remainder leverage in wheedling lower prices.
The Bay Area saw a 29 percent drop in year-over-year home sales in August, according to the California Association of Realtors. The drop in demand has meant price declines.
The region’s sale-to-list ratio has dropped to about 98 percent, meaning that Bay Area homes on average are selling slightly below asking price, according to Selma Hepp, an economist at CoreLogic.
A Redfin report last month showed that the Bay Area had the biggest declines in home prices and sales volume among U.S. metro markets, with San Francisco and Oakland the only places in the country to post year-over-year decreases in price.
San Francisco was down 6.5 percent and Oakland down 1.5 percent between July 2021 and 2022, according to the report.
At the same time, Bay Area homebuyers rank among the lowest in the nation for backing out of deals, the Chronicle reported. Among the 50 largest cities, the percentage of pending sales that fell out of contract in August reached as high as 26 percent.
But San Francisco metro had the second-lowest rate of deal cancellations at 4.2 percent, according to Redfin. San Jose had the sixth lowest rate at 8.2 percent, with Oakland eighth at 9.2 percent. In comparison, Los Angeles and Sacramento had cancellation rates of 16 percent.
— Dana Bartholomew
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