Bay Area Home Prices ‘Totally Random’ As Sales Slow

by Kathleen Pender | San Francisco Chronicle

A new 160-unit apartment complex at Market and Valencia in San Francisco, seen under construction in December. One agent said the Bay Area real estate market has been “totally random.” Photo: Paul Chinn / The Chronicle

The median Bay Area home price rose at its slowest year-over-year pace in two years in January as a slowdown that hit the real estate market in September continued into the new year.

The median price paid for a new or existing home or condo in deals that closed in January in the nine counties was $730,000, down 7 percent from December and up 2.2 percent from January of last year, according to a report released Thursday by research firm CoreLogic. In January 2018, the median price rose 13.8 percent from a year earlier.

Prices rose in the double digits for 13 consecutive months until September, when the market downshifted amid a big jump in inventory. Buyers backed off during the past three months of the year amid a jump in interest rates, a sharp stock market correction and general lack of affordability.

Many sales that closed in January were struck in December.

By the end of February, the stock market had recovered most of its losses and mortgage rates were the lowest in more than a year. The average rate on a 30-year mortgage this week is 4.35 percent, down from nearly 5 percent in November and 4.43 percent a year ago, according to Freddie Mac.

The market now “is totally random,” said agent Alexander Clark of TheFrontSteps Real Estate in San Francisco.

He listed two homes on Page Street last spring “that literally flew off the shelves,” he said. He listed another on Page Street just after Labor Day that didn’t sell until January, after he had taken it off the market. The buyer had seen it in September. Another house he sold on Page Street that closed in late January took just as long.

On the other hand, one of his buyers is in contract on a home in San Francisco that got eight offers, and “we had to go a ridiculous amount over list price to get it,” he said. “There is no rhyme or reason” in the market.

The number of Bay Area homes and condos sold in January was 3,857, down 27.8 percent from December and down 14.9 percent from January of last year. That was also the lowest number sold in the month since January 2008, CoreLogic reported. Sales typically slow between December and January, by an average of 29.1 percent over the long run.

The market usually picks up in February, as buyers try to get ahead of the spring rush.

Clark said he’s getting a lot fewer emails with subject lines such as “Still available,” “Motivated seller,” and “Can’t believe it’s still there” than he was getting from November to January.

But it’s nowhere near as frenzied as it was this time last year.

“Buyers are definitely being a little more picky; there is more to choose from,” Clark said.

Instead of listing homes far below the expected sales price, hoping to incite a bidding frenzy, agents seem to be setting prices closer to what sellers hope to get, in case they get only one offer, he added.

On the Peninsula, the market started to shift at the end of February, said Judy Citron, an agent with Compass in Palo Alto. “There is less inventory, the weather is getting better. I have started selling homes with multiple offers again,” she said.

But instead of homes getting five or seven bids like they did last year, it’s more like two or three.

“What the downturn in September did was give a little shock of reality to sellers who need to readjust their expectations a little bit,” she said.

Some buyers, remembering what happened after Facebook went public, want to get in before a number of large companies go public this year, she said.

In a recent study, Zillow looked at what happened to home prices in census tracts with a lot of Facebook employees after the company’s May 2012 IPO. It found that between March 2012 and March 2013, home values in these tracts rose 20.9 percent, compared with 16.8 percent for the 13 surrounding counties.

Most of the large companies that could go public this year — Lyft, Uber, Slack, Airbnb and Pinterest — are in San Francisco. Palantir is in Palo Alto. Of these, only Lyft and Slack have acknowledged filing paperwork to go public with the Securities and Exchange Commission. Uber has not confirmed reports that it too has filed.

“I believe we will go up slightly in the spring, but we will not see the double-digit appreciation like we had” last year, Citron said.