Bay Area Real Estate Slows in September. Marin Market Stays Relatively Strong.


Despite what historically has been the second strongest economic expansion in US history, the Bay Area housing market has been slowing. In fact, in September the market took its biggest hit across the region in terms of unit sales across all price categories leading to a 20% year over year (YOY) average decline in revenue and dragging the year to date (YTD) average down 4% . Outlying Bay Area regions like Santa Clara, Contra Costa and Alameda were especially hard hit, while Marin was comparatively less so, although sales were still down 11% in September compared to a year ago. See some key metrics below:

September home sales activity by Bay Area county, 2015-2018

Annual home sales changes by Bay Area county and price range.

Annual inventory changes by Bay Area county and price range.

The Cause

There are a number of reasons to cite for this decline with the most obvious being the Fed’s increased leading rates. This has made securing funding more expensive, especially so for the first time buyer. Consider these key trends:
  • Prices: Prices were increasing at double digit rates in first half of 2018, which sent two messages to buyers: we are in a bubble again and don’t buy at the top of the market.
  • Interest Rates: Interest rate hikes are adding to higher cost of owning and first-time buyers have not seen these “high” rates before.
  • First Time Buyers: First-time buyers represent almost 50% of buyers. Most buyers already see 20%-25% higher cost of owning compared to same time last year. More interest rate hikes will push more buyers out - affordability crisis is a concern.
  • Inventory: Inventory is up 14% because sellers wanted to sell on top of the market.
  • Price Reductions: It is not surprising to see, in conjunction with higher inventories, a corresponding increase in price reductions jumping in September.
Summary: The ‘Old Normal’ in now the ‘New Normal’?

After almost 20 years of historically low interest rates, we are seeing interest rates climbing into what was considered normal in decades past. In many ways the Fed may be doing us all a long-term favor by cooling the market down as housing values were climbing at astronomical year over year rates for the past 5+ years. In conjunction with more stringent lending standards we will lessen the chances of repeating another real estate market meltdown akin to what we saw in 2008. That said, other recession is inevitable and we have to hope that the factors that caused so much harm in 2001 and 2008 are not repeated. Regardless, with rising interest rates and slowing price gains, we are actually beginning to look like a market that were once used to.

Work With Me

Every client is different, and I strongly believe in understanding your unique needs, and helping you achieve your goals. Because of this commitment, I have distinguished myself by generating 80% of my business from client referrals.