Home Prices in San Jose Predicted to Fall 6% Next Year

Home prices in San Jose will drop faster next year than in any other large city in the nation.

That’s the conclusion of real estate brokerage Zillow, which predicts typical home prices in greater San Jose will fall to $1.37 million in November, from $1.46 million last month, the San Francisco Chronicle reported.

Zillow estimates San Jose will see a 6.1 percent year-over-year home price drop, the steepest of the 100 largest metro areas for which the listing site has data. Prices in greater San Francisco are expected to fall 4.8 percent, the third-biggest decline.

At the same time, real estate agents point to rising home prices across the South Bay region, which they expect will continue next year.

The conflicting predictions depend on whether competing buyers will keep vying for homes in the San Jose metro area, which includes Palo Alto and parts of San Benito County.

A Zillow economist said buyers will look beyond Silicon Valley for more affordable homes. But Bay Area real estate agents say that lower rates will only cause more buyers to bid for fewer homes on the market.

Typical homes in greater San Jose rose 5 percent in November from their August value of $1.39 million, according to Zillow. The region’s home value of $1.46 million in November was down from a high of $1.52 million in May of last year, before rising interest rates drove away buyers.

Those increases will soon reverse, Nicole Bachaud, senior economist at Zillow, told the Chronicle.

She said that in pricey markets such as San Jose’s, mortgage rates are still too high for many would-be buyers, slowing the market and lowering prices.

“There are no indications rates will fall significantly, and a 6.5 percent rate is still a very expensive mortgage on million-dollar homes,” Bachaud said in an email.

Sandy Jamison, a real estate broker with the San Jose-based Jamison Team, disagrees. She said the area still has lots of buyers.

While some are looking elsewhere for homes, she said, many want to stay in the region — while declining interest rates could heighten haggling among buyers, driving up prices.

“We’ve always had so much demand in the Bay Area and in San Jose,” Jamison told the newspaper. “Because there’s so much population, there’s enough buyers to absorb the limited inventory.”

Last month, home prices in the Bay Area jumped 6 percent despite rising mortgage costs, with buyers in a scarce market “getting accustomed to those higher interest rates,” according to Jim Hamilton, president of the Silicon Valley Association of Realtors.

— Dana Bartholomew