Report: Bay Area Home Sales Slowing Down in Early 2022

Home sales in California appear to be slowing down in 2022, according to a recent housing market report. In January, home sales dropped by 8.3% statewide, compared to a year earlier.

Some housing markets, including parts of the San Francisco Bay Area, experienced a much steeper decline in real estate transactions. In Marin County, for example, single-family home sales dropped by a whopping 40% year-over-year.

The question is: Does this mean the California real estate market is slowing down in 2022? Or is it a side-effect of the ongoing inventory shortage? Let’s explore!

California Home Sales Slowing Down in 2022

When measured by home sales, the California real estate market appears to be slowing down to some degree. Overall, the housing market remains highly competitive in 2022, due to an ongoing supply shortage. But a recent report showed that homes sales across California have slowed down over the past year.

On February 16th, the California Association of REALTORS® (C.A.R.) published a housing market update with data for the state as a whole, along with all counties and metro areas. Among other things, their report showed that California home sales have slowed down measurably over the past year or so.

According to the February C.A.R. report, the sale of existing, single-family homes statewide dropped by 8.3% in January 2022 compared to a year earlier. Sales were up slightly from December, but that’s just a post-holiday seasonal trend. The annual decline in home sales offers better insight into what the market is doing.

The biggest decline in home sales occurred within the Marin County real estate market. Existing, single-family home sales in Marin County declined by 40% from January of last year to January 2022. Three other Bay Area counties — Alameda, San Mateo and Santa Clara — experienced more than a 20% drop in home sales during that same 12-month period.

According to C.A.R. chief economist Jordan Levine: “a surge in interest rates in the past few weeks is concerning and will likely create affordability headwinds for [home] buyers, which may result in housing demand being curtailed in the upcoming months.”

Bay Area Sees Biggest Drop in Home Sales

Among California’s major metro and regional areas, the San Francisco Bay Area had the biggest drop in sales over the past year. Existing single-family home sales within the Bay Area real estate market declined by 22.3% from January 2021 to January 2022.

Drilling down to the county level, we see that home sales slowed even more in places like Alameda, Marin and San Mateo counties. Prices, on the other hand, continue to climb in most Bay Area housing markets.

Supply Levels Remain Low, But Have Improved

Housing market inventory remains low all across California, and especially within the state’s hottest real estate markets. But there has been some improvement on this front, from a home buyer’s perspective.

According to the C.A.R. report, the statewide “unsold inventory index” increased in January 2022, especially among new real estate listings.

To quote the report:

“California’s Unsold Inventory Index (UII) rose in January as new active listings increased 37.2 percent from December. January’s UII was 1.8 months and 1.4 months in January 2021. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.”

This is good news for home buyers. If this growth trend continues, buyers could have more properties to choose from in 2022 when compared to last year. And that is sorely needed.

Even so, the California real estate market remains highly competitive for buyers. That probably won’t change anytime soon.

Prices Still Climbing in Most California Cities

To recap: home sales in California appear to be slowing down a bit in 2022. Statewide, existing single-family home sales dropped by around 8% last month, compared to a year earlier.

House prices, meanwhile, continue to climb in most real estate markets across the state.

According to Zillow, the median home value in California rose by around 20% over the past year or so (as of February 2022). The median price rose above $745,000 last month, for the first time ever.

Some of the hottest housing markets across the state, including much of Southern California, have posted even bigger gains. Prices will likely continue to climb for the foreseeable future, though we could see a slowdown in growth during 2022.