In the first 10 months of Housing Bust 2 (now), median prices fell much faster than in the first 10 months of Housing Bust 1 (2007–11).
By wolf richter For wolf street,
Better be halfway through a good spring sales season that has supposedly already started in San Francisco and Silicon Valley, because it’s getting pretty bad, pretty fast. But it’s hard to imagine how well the spring sales season could turn out amid countless news of layoffs, work from home, and large numbers of people being told about how many people are moving to Silicon Valley and San Francisco. Have left According to census data, the city of San Francisco alone lost nearly 56,000 residents, or about 6.3% of its population, in the period 2020 to 2022, even as nearly 12,000 new housing units were completed in the same period.
The median price in the nine-county Bay Area fell 8% from December to January and 17% year-over-year, and fell 35%, or $540,000, in the 10 months from the insane peak in March 2022. $1.54 million to $1.00 million, according to the California Association of Realtors.
Sales of single-family homes in the Bay Area fell 37% in January compared to January last year. The sales decline has been in the same year-over-year range for months.
Seasonally, January is generally the worst month of the year for the average price of sales that closed in January, reflecting deals that closed in December. So the hopes are that it will be rolling out during the spring sales season that everyone has been praying for.
But where is the demand going to come from during this prayer-spring sales season? People are worried about their jobs now, and buying still ridiculously overpriced homes, as mortgage rates once again near 7%, probably isn’t the number one priority. In addition, there is also the fear of trying to catch a falling knife. The population of the area has decreased. And amid layoffs and hiring freezes, many people from elsewhere are no longer being brought in with the promise of higher wages.
But the 35% drop hasn’t hurt a ton yet In a broader sense because the price jump was so sharp and so crazy that not many people actually bought homes in 2021 and 2022 at these crazy prices. Most people who bought in 2019 or earlier — the vast majority of homeowners — are still above water.
In other words, the 35% drop hasn’t even worked the entire pandemic-free-wealth spike. But suddenly the illusion of wealth disappeared as fast as they had appeared.
As you can see from the jagged line in the chart, average prices are volatile and they are seasonal, and they can be skewed by the mix of what actually sells, etc., so they need to be handled with care. But this decline is historic nonetheless.
Blast from the Past: Housing Bust 1 vs Housing Bust 2, During the housing bust 1, which began in the Bay Area in mid-2007, the median price fell 59% over the 21 months from May 2007 ($789,250) to February 2009 ($321,110), when it hit its lowest point.
Unfortunately, during the first 10 months of Housing Bust 1, the median price fell only 23%, compared to 35% over the 10 months so far in Housing Bust 2. This chart is a blast from the past, the housing bust 1 in all its glory:
The five largest counties of the Bay Area.
San Francisco: The median price for single-family homes in March 2022 dropped 33%, or $675,000, from $2.06 million to $1.38 million over 10 months. Year-to-date, the average price fell 15%.
The average price in January was also in line with January 2019. For the first time in February 2016, the average price reached $1.38 million. Spring sales season will be better:
Silicon Valley: San Mateo County: The median price of single-family homes fell 32% from the peak in April 2022, to $776,000 in nine months, from $2.40 million in April to $1.62 million in December. Year-to-date, the average price declined by 19%.
This average price was almost flat with January 2021 and was first seen in February 2018.
Silicon Valley: Santa Clara County (Including San Jose): The median price of single-family homes rose in January but was down 22%, or $440,000, from the peak in April 2022, falling from $1.97 million to $1.53 million in nine months. Year-to-date, the average price was down 11%.
Alameda County (Includes East Bay, Oakland): The median price for single-family homes fell 31% from the peak in May 2022, or $479,000, from $1.54 million to $1.06 million. Year-to-date, the average price was down 15%.
Contra Costa County (East Bay): The median price of single-family homes fell 30% from the peak in April 2022, or $313,500, from $1.05 million to $736,500. Year-to-date, the average price was down 11%.
average time on market The Bay Area had 32 days in January before a property was sold or pulled off the market because it didn’t materialize. This was up from 28 days in December 2022 and 12 days in January 2022.
So a good spring selling season — or at least not a disastrous one — is what everyone’s praying for now. In January, mortgage rates fell to near 6% and the stock market soared, but it’s already over. The daily measure of the average 30-year fixed mortgage rate is already above 6.75%, according to Mortgage News Daily, amid renewed inflation fears and disappointed Fed-pivot expectations.
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