Bay Area home prices dip for first time in 13 months

Home prices in the Bay Area fell for the first time in 13 months, as declining mortgage rates brought more sellers onto the market and increased the available inventory.

“With more homes on the market, buyers have more choices,” said Barbara Clemons, president of the Bay East Association of Realtors. “Sellers may have to make some adjustments and be sure that they’re pricing their homes accordingly.”

The median sale price of a single-family home in the nine-county Bay Area fell to $1.24 million, down 1.6% annually, according to recently released data from the California Association of Realtors. The median price was $1.27 million in Alameda County, $841,950 in Contra Costa County, $1.53 million in San Francisco, $1.9 million in San Mateo County, and $1.85 million in Santa Clara County.

Across the Bay Area, inventory was at its highest level since February 2023, as falling rates motivated some sellers to finally list their homes after waiting for months. The rate for a 30-year fixed mortgage has fallen throughout the summer, landing at 6.09% in mid-September from a high of 7.22% in May, according to Freddie Mac. The Federal Reserve on Wednesday cut interest rates by half a percentage point, its first cut in four years.

“A lot of sellers realized, ‘I’m not going to wait if I want to make a move. Let’s do something now,’” said David Stark, director of government affairs for the Bay East real estate agents group.

The increase in inventory also translated into an increase in the sales volume in the Bay Area, which was up nearly 5% from August of 2023.

Homes across the nine-county region also were staying on the market longer — a median time of 20 days, which was an increase from 14 days at this time last year.

With homes taking longer to sell, “pricing is everything,” said Tim Yee, a San Jose-based real estate agent.

“It’s been enough of an uptick in inventory that people who are not pricing right are finding it out fairly quickly,” Yee said. “We’re seeing less of people saying, ‘My neighbor sold his place for $2 million, so I should be able to get that.’”

Many agents feel that the market is balancing out. But agent optimism might not resonate with some Bay Area buyers, who are still dealing with prices much steeper than pre-pandemic days and plenty of competition for lower-priced starter homes.

That’s the case for Annie Chang, who started searching for a home late last year. The 29-year-old lab technician and her husband, an engineer, set a budget of $650,000 and started looking at condos around Fremont. They bid on one, but after getting a better idea of their closing costs, they backed out of the sale.

“There’s no way someone who is a first-time homebuyer can actually buy these homes unless they have help from family or are in a tech job,” said Chang, who grew up in the Tri-Valley area near San Ramon. “It’s annoying, to say the least — especially being a native here.”

After growing increasingly disappointed with the offerings on the market, the couple put their home search on pause.

Some agents say that the Federal Reserve’s decision earlier this week to cut interest rates by half a percentage point — the first cut in four years — could heat up an otherwise cooler fall home selling season, bringing exhausted buyers like the Changs back into the market.

But that depends on whether the interest rate cut, and any others that may come before the year’s end, will bring down mortgage rates further — and it’s not certain that they will. Experts say lenders have already been anticipating the interest rate reduction and priced their mortgages accordingly.