Reversal: Bay Area Housing Supply Is Starting to Rise for a Change

As we reported in a previous blog post, housing market supply levels within the San Francisco Bay Area are finally starting to rise.

Another report, published just days ago, showed a continuation of this trend. Specifically, it showed a significant increase in the number of active real estate listings across the San Francisco-Oakland-Hayward metropolitan area.

Granted, we have a ways to go before we approach anything resembling a “balanced” real estate market. But these reports bring good news for frustrated home buyers all across the Bay Area. They’re the latest sign that the market is starting to move in a buyer-friendly direction for a change.

Housing Market Supply Continues to Rise in Bay Area

On June 30, researchers from Realtor.com published an updated housing market report with data for the nation’s 50 largest metro areas. This report contained a wealth of information relating to home prices, sales activity, and inventory levels nationwide.

For the San Francisco Bay Area, it showed a measurable increase in the number of homes for sale. This is good news for home buyers in our region, many of whom have been frustrated by tight supply conditions over the past couple of years.

According to the July 2022 Realtor.com housing market report, active real estate listings in the San Francisco-Oakland-Hayward metro area increased 46% in June, compared to a year earlier.

This number is significant for a couple of reasons. For one thing, it shows a significant uptick in the number of homes for sale in the area. It also shows a reversal from the company’s previous reports, which showed that inventory was still dropping.

For example, the company’s April 2022 housing report showed that active listings in the Bay Area were down by -4.1%, year-over-year. And in March of this year, they reported a -10.7% decline in total listings.

So we appear to be at a turning point where inventory is concerned. Instead of having a “shrinking” real estate market, the Bay Area housing scene is now experiencing a steady increase in supply. And that’s great news for local buyers.

According to Danielle Hale, Chief Economist for Realtor.com:

“Our June data shows the inventory recovery accelerated, posting the second straight month of active listings growth in nearly three years. We expect these improvements to continue, as predicted in our newly-updated 2022 forecast.”

Real Estate Scene Is Getting Better for Buyers

This is just one of several reports that suggest the Bay Area real estate market is starting to shift in a more buyer-friendly direction.

For many months now, home buyers in our region have had to contend with record-low inventory levels and fierce competition for houses. But we are now seeing several indicators that point to a shift within the Bay Area housing market.

In addition to the inventory increases mentioned above, the overall pace of the real estate market seems to have slowed down. This can be seen in the number of sales, and by the amount of time homes are spending on the market before going under contract.

The short version is that the Bay Area real estate market is not quite as competitive as it was throughout 2021. The pace has slowed down, as more and more homes come onto the market. And these trends could continue through 2022 and into 2023.

A Slowdown in Home-Price Growth Ahead?

Historically speaking, home-price growth tends to slow down as supply levels increase. It’s “Supply and Demand 101.” When demand rises and supply levels fall, prices tend to climb at a faster rate. And the opposite is usually true as well. As supply levels increase, we tend to see less upward pressure on house values.

Higher mortgage rates and prices could also reduce demand within the Bay Area real estate market, during the second half of 2022. This too could contribute to slower price growth over the coming months.

The bottom line to all of this is that the San Francisco Bay Area housing market is starting to simmer down. Additional supply gains could calm the market even further, through the rest of 2022 and into 2023. That would be a positive trend from an economic stability standpoint.

Despite these promising trends, we probably shouldn’t expect to see a classic buyer’s market any time soon. Rising inventory could lead to more price reductions, fewer sales, and a generally slower pace. But the local real estate scene will probably remain tilted toward sellers for a while longer.