Low inventory lifts Bay Area home prices from slump 

After reaching a low point this spring, home price declines across the Bay have begun to reverse course, according to recent Compass data. 

In San Francisco, for example, the three-month rolling average in May was down 20 percent, year over year. By July, the year-over-year decline was only 16 percent, for an average price of just over $1.5 million. 

The same trend was seen across the Bay, with Sonoma the furthest along in its price recovery. Its July year-over-year rolling average was $850,000 — the same as one year ago. Sonoma is the only Bay Area county to completely catch up with its year-ago pricing and the only county to have a slightly higher year-to-date average price versus 2022. Santa Clara, Contra Costa and San Mateo counties were within 5 percent of their year-ago rolling averages in July, after recording double-digit declines earlier this spring. 

There are several reasons for the uptick, according to Compass Chief Market Analyst Patrick Carlisle. Buyer demand is back from its nadir in the second half of 2022 and has been met by a “plunge” in new listings, he said via email. More than 20,000-fewer properties were put up for sale in the San Francisco and San Jose Metro markets during the past 12 months, a 32 percent drop from the previous 12-month period.

“Along with the recovery in buyer demand, this has been a defining factor in 2023’s rebound in home prices,” he said.

Also, spring 2022 was when many Bay Area markets peaked, so the rolling averages for July are no longer compared to top-of-the-market pricing, he added. 

Carlisle said that inner Bay Area county sales have slowed again more recently, which he attributes to the usual summer slowdown and not a decrease in demand. He expects the usual fast-paced fall, particularly in San Francisco, where there could be a rush of much-needed inventory after Labor Day.

“In SF, September is often the single month of the year with the highest number of new listings, which fuels the market for a couple of months before the big, mid-winter slowdown,” he said. 

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