Hit by waves of layoffs, falling stocks, falling cryptos, and 6% mortgage rates.
By wolf richter for wolf street,
Home prices are down for all of California, with Southern California being affected, even San Diego, but the Bay Area is exceptional in terms of the sharp and deep drop in prices.
Sales of single-family homes in the Bay Area declined 37% year-over-year. But in Southern California, where the price drop hasn’t been that big yet, sales fell 48%. Across California, sales fell 44% to 240,000 homes, just a hair higher than the housing bust 1 low at the end of 2007.
According to the California Association of Realtors, the median price of single-family homes in the San Francisco Bay Area is set to drop 30% from a peak in March 2022 to nearly $455,000 in December, from $1.54 million to $1.08 million in nine months. , The plunge in December — after months of layoff announcements by companies large and small in the sector — was particularly brutal.
This 30% drop from the peak only put the average price back roughly where it was in December 2020, showing just how insane the price increase was during the free-money pandemic. But not many people bought houses in these two years. So in short, this 30% drop is not a big deal in the overall scheme of things.
But for those who constantly watched Zillow to see how rich they got by living there, well, they might have to stop watching. Problem solved – unless they want to sell.
Year-to-date, the average price dropped nearly 10%. Per square foot, the average price also fell by about 10%.
A few caveats here about median prices: they’re volatile and they’re seasonal, and they can be skewed by the mix of what’s actually sold, etc. But in such a large market—the nine-county Bay Area one with a population of roughly 7.6 million people—the median price is a reasonably reliable indicator of the direction and magnitude of price change.
Seasonally, January is the low point for average prices in the Bay Area. So one more month to go. Then the spring sales season typically appears when demand normally drives up prices. But this may not be a normal year.
Where should this demand come from? Who is going to buy at these prices, with layoff announcements spreading across the sector on a daily basis, and share prices of local companies (stock-based compensation plans) and crypto collapsing? Who would be desperate to buy at these still sky-high prices? At what cost will the buyer get out of the woodwork? It will be tested in the next few months.
The five largest counties of the Bay Area.
Silicon Valley: San Mateo County: The median price for single-family homes dropped 30% in April 2022, to $726,000 over nine months, from $2.40 million in April to $1.67 million in December. Year-to-date, the average price declined by 14%.
This median home price is now below where it was in December 2020, and below where it was first in April 2018.
Sales of single-family homes fell 38% year-over-year. It was bad enough. But sales of condos have essentially been frozen, falling 64% year-over-year.
Silicon Valley: Santa Clara County (Including San Jose): The median price of single-family homes fell 25% from the peak in April 2022 to $455,000, from $1.97 million to $1.48 million. Year-to-date, the average price fell 15%.
Single-family home sales: -43% year-over-year. Condo sales: -48% year-over-year.
San Francisco: The median price of single-family homes fell 24%, or $496,000, from the locked-in-the-low-mortgage-rate-peak in March 2022, from $2.06 million to $1.56 million, despite an uptick in December. Year-to-date, the average price is down 7.5%.
Sales of single-family homes: -24% year-over-year. Condo sales: -52% year-over-year.
Condos are a big part of the city, including several new towers south of Market, where sales have plunged as tech companies headquartered in the area, including Twitter and Salesforce, have announced a gazillion layoffs. Year-to-date, condo prices have declined by 23%.
Alameda County (includes East Bay, Oakland): The median price of single-family homes fell 31% from the insane peak in May 2022, or $479,000, to $1.06 million from $1.54 million. Year-to-date, the average price is down 11%.
Sales of single-family homes: -37% year-over-year. Condo sales: -45% year-over-year.
Contra Costa County (East Bay): The median price of single-family homes fell 26%, or $272,000 from the peak in April 2022 to $1.05 million to $778,000. Year-to-date, the average price is down 6%.
Sales of single-family homes: -36% year-over-year. Condo sales: -50% year-over-year.
average time on market In the Bay Area, the number of days before a property is pulled by a depressed seller, or before it is sold, more than doubled year-over-year, from 13 days in December 2021 to 27 days in December 2022.
Everyone can guess that January is going to be bad. So now all eyes are on the coming spring sales season, amid this constant drumbeat of layoffs at companies headquartered in the region, or with larger operations in the region. Beyond actual layoffs, announcements of layoffs also create a great deal of uncertainty among those who have not yet been laid off. And that can’t be a good motivator to go out on a limb and still buy a ridiculously overpriced home.
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