Date Published: August 31, 2023
Well, this comes as somewhat of a surprise: against all predictions, and in stark contrast to what you hear from the nattering talking heads on TV, Bay Area real estate prices seem to be rising.
But the key word there is seem – because appearances can be deceiving. Check out this chart which shows the increases and decreases in the Santa Clara county median home price over the past year.
This chart shows the year-over-year appreciation or depreciation in single-family home prices for each month between August 2022 and August 2023. Those red bars all show lower home prices versus the year-ago period – and there’s a lot of red bars.
But then, almost miraculously, the data show the first year-over-year increase in home prices in Santa Clara county in August, after nine straight months of declines.
I consider Santa Clara county to be the bellwether county for the Bay Area, but it doesn’t exist in a vacuum. Let’s take a look at some of the other Bay Area counties and what their median home price numbers look like:
- San Francisco: $1,560,000 (-3.1% vs. $1,610,000 year-ago)
- Contra Costa: $835,000 (-1.8% vs. $850,000 year-ago)
- San Mateo: $1,800,000 (-1.7% vs $1,831,000 year-ago)
- Santa Cruz: $1,200,000 (-7.69% vs. -$1,300,000 year-ago)
- Monterey: $875,000 (+6% vs. $825,000 year-ago)
Although Santa Clara county often shows where nearby counties are headed, it is by no means an incontrovertible fact that where Santa Clara goes, the others follow. When considering the overall state of the market, we must look beyond Santa Clara county.
Also, a single month with an uptick in prices does not a trend make. Before we can truly say that prices are on the upswing, I’d want to see at least three months in a row of year-over-year price increases. We’re one third of the way there, but it’s really too soon to say the market has turned up again – especially considering that many counties are still showing red.
Why are Bay Area Prices High…and Rising?
I think it’s also important to examine the reason why prices have increased in Santa Clara (and Monterey) county. Spoiler alert: it’s not because there’s a whole new cadre of well-heeled buyers out fighting each other for ever-more-fabulous homes.
Rather, prices are being buoyed up by vexingly low supply. With so little inventory, bidding wars are still common, with only the most well-heeled buyers able to compete for scant supply.
Take Santa Clara county again: it ended August 2023 with just 685 single-family homes for sale…versus August 2022, when we closed out the month of August with 1,323 homes for sale – or 48% fewer homes on the market.
This goes a long way to explaining why home prices were up so sharply in Santa Clara in August 2023.
Compare that to Santa Cruz county – which ended August 2023 with 273 homes for sale. A year ago, we ended August 2022 with 303 homes for sale – still fewer, but only 9.9% below. And with a modestly reduced supply of homes, Santa Cruz still saw a 7.7% drop in prices.
What about Monterey county, which saw prices increase 6% year-over-year? We ended the month with just 355 single-family homes for sale, versus 503 homes available a year ago – a drop of 29.4% of inventory. And this again goes a long way to explaining why prices rose in Monterey year over year, despite the high interest rates.
The real estate market today has struck a delicate balance…or perhaps better to say, a fragile imbalance…between supply and demand. And the fact is that where supply is especially low, prices are remaining particularly lofty, and climbing.
Were the balance of supply versus demand to change with a bloom in supply, it’s easy to see how the prices would start sliding back down again.
But this choked-off supply is excellent news for homeowners contemplating a sale. Despite the meteoric rise in interest rates, the paucity of inventory means it’s still possible to get a sky-high price for your home in today’s market.
When will the delicate balance of supply versus demand change? Nobody knows. It could happen next month, or it could be some years away still.
Regardless, if the time has come for you to make a move, and you’d like some honest advice about how to get the highest price possible for your home in today’s market…please don’t hesitate to contact me.