Could We See a Bay Area Buyer’s Market in 2023?

If you happen to follow real estate market trends in the San Francisco Bay Area, you’ve probably seen reports that the housing market is cooling down. And it’s true. After two years of overheated activity, the Bay Area real estate scene is starting to downshift to a slower pace.

These reports have a lot of people wondering the same thing: Could we see a buyer’s market in the Bay Area during 2023? Could the local housing market shift enough to where it favors buyers over sellers?

The jury is still out on that one, given the many variables involved. But it does seem that the Bay Area real estate market is finally starting to shift in a more buyer-friendly direction. There are more homes coming onto the market, along with a slower pace of sales activity.

Is a Bay Area Buyer’s Market Possible in 2023?

We probably won’t see a classic buyer’s market in the Bay Area in 2023, mainly due to the inventory situation.

In a traditional buyer’s market, there’s usually an abundance of homes for sale relative to the number of buyers who are seeking them. It occurs when supply greatly exceeds demand. And that doesn’t seem likely any time soon, given the record-low inventory levels we’ve been experiencing.

But we could see a “new” type of Bay Area housing market in 2023. We might experience a slowdown in price growth and home-buying activity, despite the ongoing supply shortage.

Home Sales Are Slowing Down

Over the past few weeks, numerous reports have shown a slowdown in home sales all across the San Francisco Bay area. The same goes for the nation as a whole. Both the number of sales and the overall pace of the real estate market have declined in recent months, partly due to higher housing costs.

According to a June 2022 report from the California Association of Realtors:

“Existing, single-family home sales totaled 377,790 in May on a seasonally adjusted annualized rate, down 9.8 percent from April and down 15.2 percent from May 2021.”

These trends could favor buyers over the coming months, by giving them more negotiating leverage.

More Inventory Growth (at Long Last)

Inventory changes also suggest that we might be moving toward a more buyer-friendly real estate market in the San Francisco Bay area. As we reported in previous blog posts, more and more homes have been coming onto the market lately.

According to a recent report from Realtor.com, the total number of active property listings in the San Francisco-Oakland-Hayward metropolitan area rose by 46% over the past year or so.

If this trend continues, it could push us closer to a buyer’s market scenario in 2023. At the very least, inventory growth could help level the playing field between home buyers and sellers across the Bay Area.

Higher Housing Costs Could Ease Competition

We talked about the supply situation, and how it might move us closer to a Bay Area buyer’s market in 2023. But there’s a demand side of the equation as well.

When home buyer demand declines, we tend to see an overall slowdown in the real estate market. That’s a trend we could see more of through the rest of 2022 and into 2023.

Housing costs have a lot to do with this. Both mortgage rates and home prices have risen substantially over the past year. In fact, the average rate for a 30-year fixed mortgage loan rose by more than 2% since the start of 2022.

That’s based on the weekly survey conducted by Freddie Mac. When they published the results of their latest survey, Freddie Mac’s researchers said they expect that “the housing market will continue to normalize” over the coming months.

And we don’t have to tell you about the significant rise in home prices over the past two years. Regionally, house values have risen by around 40% since the summer of 2020.

Granted, there are still plenty of buyers in the Bay Area who can afford to make a purchase. Our local wages and incomes are higher than the national average, so there are still well-qualified buyers in the market seeking properties. But overall, there could be fewer of them in 2023 due to rising costs.

All of these trends could shift the supply-and-demand dynamic within the Bay Area real estate market. It might not create a classic buyer’s market scenario in 2023. But it could certainly level the field and give house hunters some additional leverage.