Bay Area home shoppers started dropping out of the sweltering market in May, weary of record-setting prices and budget-busting bidding wars.
Single-family home sales in the nine-county region fell 7.4% from April to May, an unusual retreat during a typically busy spring buying season. But Bay Area prices showed no sign of slowing — the median price for a single-family home hit $1.2 million in May, according to CoreLogic data. The overall median, including condos and new homes, touched $1 million.
CoreLogic economist Selma Hepp said demand remains strong, but rising prices are starting to cool interest. Typically, sales increase between April and May. “This decline is not consistent with historical trends,” she said.
While soaring prices are pushing some buyers out of the market, sellers continue to have their pick of offers and reap enormous financial gains. Low interest rates, high savings rates, few homes for sale and a pent-up demand for space during the COVID-19 pandemic have driven quick sales and high prices during the first five months of the year.
Bay Area single-family home prices leaped 38% to $1.2 million from May 2020, when pandemic safety measures and health concerns stalled the market.
The median sales price for existing single family homes in May soared in lower cost East Bay communities: prices in Contra Costa County rose 42% to $925,000 and jumped 38% in Alameda County to $1.17 million. Prices in Santa Clara County, up 19% to $1.52 million, San Francisco, up 12% to $1.73 million, and San Mateo County, up 10% to $1.75 million, all reached record territory, according to CoreLogic.
But overall, single-family home sales fell in every county except San Mateo from April to May.
Hepp attributed some of the higher median prices to more expensive homes being purchased during the last several months. The CoreLogic index of home prices, a measure which more closely tracks home values in a community, shows more modest gains in most parts of the Bay Area, she said. For example, only home values in Contra Costa and Marin counties were above the 13% year-over-year increase nationally.
Agents say buyer fatigue is setting in, with fewer offers coming in than in previous months. But motivated home shoppers are still pushing up prices in bidding wars — exceeding asking prices by 30% or more in some attractive Silicon Valley neighborhoods.
San Mateo agent Jeff LaMont said the divide between tech couples and non-tech professionals buying in the Bay Area has become even more pronounced.
Tech professionals, working from home and accumulating wealth through stock grants and bonuses, have paced the Peninsula market, he said. Other families suffering job or income losses have been left out of the buying frenzy. “It’s become more stark,” LaMont said. “If you’re not in the right sectors, you got hammered.”
Property prices continue to soar above initial listings, he said. A three-bedroom, two-bathroom home in Millbrae listed for $1.7 million and, after a short, intense bidding war, sold for a $2.2 million, he said. Another home in the community listed for $1.48 million and sold for $2 million. “That’s happening up and down the Peninsula,” LaMont said.
Oakland agent Jeffrey Neidleman, president of Bridge Association of Realtors in the East Bay, sees hints that a summer lull might be ahead as families venture out for long-delayed travel and vacations. The number of homes for sale in Alameda County has edged up in recent weeks, and the number of homes and condos in contract has dipped.
Still, the East Bay remains competitive. Neidleman said young tech couples priced out of San Francisco see East Bay prices and think, “Oh, Oakland’s for sale!”
One family — a mother and her daughter and son-in-law — have been looking for a duplex to purchase instead of paying two rents. They started off with an $800,000 budget and a desire to be in a safe, walkable neighborhood, Neidleman said. But after losing a few bidding wars, they’ve stretched their budget over $1 million and, he said, “they’re open to any location.”
Neidleman has also noticed a drop-off in relocations to the Bay Area. Some companies don’t seem willing to pay new employees the premium to move to the most expensive housing market in the country, he said.
Los Gatos broker Doug Goss said most desirable Santa Clara County homes are selling within days of hitting the market. But a home that might have drawn 10 offers is now getting four or five and “they’re still very good offers.”
Goss, president of the Santa Clara County Association of Realtors, said the intense competition is taking a toll on some buyers, who come in with “outrageous offers” after losing several bids.
His advice? “Be smart about what you’re purchasing.”
