Bay Area Housing Market – Your 2023 Guide

Aalto Insights Team
Aug 10, 2023

If you’re looking to buy a home in the Bay Area, we’ve got good news: After a crazy couple of years, home prices are finally beginning to decline. However, since these homes are in the Bay Area, they’re still priced higher than other places around the country. Also, with interest rates for a 30-year loan currently hanging around 6.875%, many sellers looking to buy and sell simultaneously are feeling the pressure to hold onto their homes until they can secure a better loan. 

Here are some of the Bay Area housing market trends you should expect to see for the rest of 2023.

Average Home Prices in Bay Area Counties

In June 2023, the median sale price for a single-family home in the Bay Area was $1,323,810, according to the California Association of Realtors (CAR). That’s up from $1.3 million in May 2023 but less than in June last year, when average home sales in San Francisco were $1.36 million.

Here are the median home prices for each of the counties that make up the San Francisco Bay Area:

Housing market bay area: Median Purchase Price of Single-Family Homes

Despite Declines, Bay Area Homes Remain Costly

Let’s face it — when it comes to the housing market, Bay Area home prices were never cheap. While the table above shows a year-over-year price decline, homebuyers still have to come up with hundreds of thousands of dollars if they want to make a 20% down payment, unless they use a homebuyer assistance program. Then, you must pay higher mortgage rates on top of it.

Think of it this way: In June 2021, the average interest rate for a 30-year fixed mortgage was 3.179%. Today, it’s more than double that. If you took out a million-dollar loan in 2021, your monthly mortgage payment would be $4,368. Today, that same million-dollar loan would result in a monthly payment of $6,569.

Luckily, the probability of a recession is becoming less and less likely. Goldman Sachs predicts that the odds of the U.S. falling into one within the next year is down to 20%. As these concerns ease, we will likely see the Federal Reserve begin to lower interest rates in the not-too-distant future.

Population Changes Are Impacting the Real Estate Market

Housing market bay area: 2 bikers and the Golden Gate Bridge in the background

All nine Bay Area counties are experiencing population declines ever since the pandemic started. In 2020, the population of San Francisco County was 870,014. Today, it’s 715,717.

Like many other major U.S. cities, including New York, Los Angeles, and SF’s neighbor, Oakland, many San Francisco homeowners and renters moved out of the city limits during the pandemic to work from home and enjoy a lower cost of living and more space in the suburbs.

Tech layoffs are another factor contributing to the Bay Area’s population decrease. The Bay Area housing market has been historically fueled by tech, so changes to the industry have impacted the local climate. Without the safety of a sizable salary to fall back on, affordability has become a driving factor for many.

Rents and Inflation Are Also Impacting the Market

Rising mortgage rates and housing prices aren’t the only barriers to homeownership in the Bay Area. Rent prices in the Bay Area are among the most expensive in the U.S. While studios and one-bedroom homes are becoming more affordable compared to the past year, rent prices for two-bedroom homes have increased.

CPI Inflation Calculator

Inflation also plays a major factor in how much home a potential homebuyer can afford. Sadly, $1,000 in June 2020 has the same buying power as $844.93 in June 2023. In other words, if you put $1,000 into a checking account in June 2020, and it didn’t collect any interest, that $1,000 is equivalent to $844.93 today.

Sale-to-List Ratios Are Nearly Spot On

The sale-to-list ratio is a real estate metric that determines how close the list price is to the final sale price. The formula is as follows:

Sale-to-List Ratio = (Final Sale Price / List Price) x 100

If the list price of your home is $1 million and it sells for $1.05 million, then the equation is:

Sale-to-List Ratio = (1,050,000 / 1,000,000) x 100

Sale-to-List Ratio = 1.05 x 100

Sale-to-List Ratio = 105%

This ratio can tell you a lot about the housing market. When a home sells for well above its asking price, you’re likely in a seller’s market. If homes sell below their asking price, you may be in a buyer’s market.

The current sale-to-list ratio for the Bay Area housing market is 101.7%. If your list price is $1,000,000, you would get $1,017,000 for it, on average. In other words, the real estate market is pretty balanced right now.

Home Listings Are Fewer Than in 2022

Fewer sellers are listing their homes in 2023 than last year. According to CAR, there were 4,928 new home listings in May 2022. In May 2023, there were only 3,574. In addition to the 27.5% decrease in listings, there were also 23.8% fewer sales.

The CAR also reveals that the Bay Area housing market has roughly 1.5 months of unsold inventory, which is currently the lowest supply of homes throughout California.

Bay Area Housing Market  Appreciation Rates Remain High

Housing market bay area: people walking outdoors

Despite declines, tech layoffs, the pandemic, and many other contributing factors, Bay Area homeowners are still enjoying one of the highest overall appreciation rates in the country — depending on when you bought your home.

In February 2012, the median value for a single-family home in the nine-county Bay Area region was $405k. By the end of 2022, the median sale price for the San Francisco metro area was $1.23 million. That’s a 303.7% increase in just 10 years.

Even though home values are decreasing now, San Francisco is known for having one of the country's greatest long-term real estate investment track records.

Bay Area Housing Market Predictions for 2024

After the unpredictability of the pandemic followed immediately by the fears of a looming recession combined with tech layoffs, 2024 is predicted to usher in more stability.

We’re not expecting to see crazy home value fluctuations or a seismic pendulum swing from buyer’s to seller’s markets. For the first time in years, we could see a reasonably balanced market without major home value increases or decreases.

A balanced housing market could be great for buyers and sellers alike. Buyers will have time to catch their breath, rebuild their savings accounts, and finally become homeowners. Meanwhile, sellers can put their homes on the market and be a little less stressed about whether or not they get the asking price for their homes. Of course, there are always outliers and extraneous factors that could turn the entire real estate market on its head, but for the moment, it doesn’t look like anything’s rocking the boat any time soon.

Navigating the Housing Market With Aalto

While the Bay Area housing market seems to be calming down, Aalto exists to disrupt the residential real estate industry away from insiders and toward people like you. Whether you’re looking to buy your dream home or sell the house you’ve got, our self-service real estate platform focused on Bay Area homes can save you tons of money in fees.

Better yet — you’ll have experts on-demand to help you every step of the way. Are you ready to start exploring the housing market in Santa Clara County, Marin County, or other counties in the area? 

Sign up with Aalto today to see exclusive listings in the Bay Area that you won’t find anywhere else.

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