Home prices across the Bay Area rose by double digits last month, but many potential sellers decided not to play the game.
The region’s median home price shot up 17 percent to $1.23 million between February and March, while buyers faced a shortage of homes for sale, the San Jose Mercury News reported.
The culprit: high interest rates, with potential sellers unwilling to trade up for pricey loans.
Homeowners who might otherwise be willing to sell had locked in mortgages before average interest rates rose above 6 percent last year, the highest since 2008. Now those homeowners don’t want to ditch mortgage rates as low as 3 percent.
“Why would you sell at that rate?” Lafayette real estate agent Paddy Kehoe asked the Mercury News. “It’s free money.”
On a yearly basis, the region’s median home price is actually down 13 percent compared to March 2022, a reflection of tech layoffs, recession worries and rising mortgage rates battering home values during the second half of last year after inflating during the pandemic buying boom.
The rate increases spiked monthly home payments by thousands of dollars, squeezing many would-be buyers out of the market.
The number of transactions has fallen as inventory dried up last month. The market had enough homes for sale to meet six weeks of demand, down from more than 10 weeks in February, according to the California Association of Realtors. A balanced housing market has 12 weeks or more of supply.
And as home inventory dropped, prices soared.
The median sales price of single-family homes rose from between 11 percent and 16 percent from February to March in counties from Santa Clara ($1.7 million) to Alameda ($1.23 million) to Contra Costa ($852,500) and to San Francisco ($1.7 million).
A 10.6 percent price drop in San Mateo County to $1.86 million was blamed on a likely correction from a 28 percent spike in February because of a spike in homes selling for more than $2 million.
A typical monthly increase for the Bay Area in late winter is 9 percent, Oscar Wei, an economist with the Association of Realtors, told the newspaper.
While Wei expects prices to continue to climb through most of the peak home-buying season this spring and into the summer, he doesn’t foresee the record-setting price jumps of the past few years.
“The region is still being more cautious because of the economic environment and because of the tech industry, and also we don’t have 3 percent rates anymore,” Wei said.
— Dana Bartholomew
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