Report: S.F. Bay Area Housing Market Accelerated the Most in 2023

Like many cities across the country, the San Francisco Bay Area real estate market cooled down in 2022 due to rising mortgage rates. But since the start of this year, the Bay Area housing market has been warming up again, with faster sales and increased competition among buyers.

Now, a new report offers even more evidence of this trend.

Among the nation’s 50 largest metro areas, the Bay Area housing market experienced the biggest decline in “time on market” during 2023. This means that homes are selling faster now than they were a year ago, a trend that could carry into 2024 as well.

Bay Area Housing Market Moving Faster in Fall 2023

Earlier this month, researchers from Realtor.com published a housing market update with data for the nation’s 50 largest metropolitan areas. The San Francisco-Oakland-Hayward metro area was included in this report as well.

According to the authors, the Bay Area real estate market has accelerated over the past year, more so than any other major U.S. metro.

During the month of September 2023, homes listed for sale across the San Francisco Bay Area spent a median of 29 days on the market. That was nine fewer days than a year earlier, which indicates an overall faster pace of home sales.

To quote the October 2023 Realtor.com report:

Time on market decreased compared to last year in 30 of the 50 largest metro areas. The largest drops were in San Jose, Calif., San Francisco (-9 days), and Sacramento, Calif. (-8 days). This is primarily because this region experienced the most significant slowdown last year when interest rates rose.

One Reason: Fewer Homes Available

Several overlapping factors have contributed to this acceleration. As mentioned in the above quote, the Bay Area real estate market cooled down significantly last year. So it’s only logical that it would experience one of the fastest rates of acceleration when it comes to home sales.

But there are other factors at work here as well, and inventory is one of them.

According to the recent Realtor.com report, the Bay Area housing market currently has fewer homes listed for sale when compared to a year ago. Within the San Francisco-Oakland-Hayward metro area, the total number of active real estate listings declined by nearly 19% over the past year or so.

This trend has increased competition among local buyers, leading to faster home sales across the region. It’s also putting upward pressure on home prices, as we approach the last two months of 2023.

The median home price for the area has risen for the past few months in a row and is approaching the $1.2 million threshold, according to data provided by Zillow.

Are Sellers Gaining Confidence?

This latest report also revealed that fewer sellers have been reducing their list prices lately. Within the Bay Area housing market, only 12.7% of listings had a price reduction last month. That marked a decline of 5.4 percentage points from a year earlier.

In this context, a “price reduction” occurs when a homeowner lists their home for sale at one price, but eventually reduces the price due to a lack of offers. Such reductions tend to be more common in a slower market, and less common in a more competitive and fast-paced housing market.

This trend also points to increased confidence among sellers. With inventory levels down from a year ago, sellers might realize that they now have more negotiating leverage and therefore less need to slash their prices.

Outlook for Home Buyers in 2024

So, what does all of this mean for Bay Area home buyers through the rest of this year and into 2024? What will the local real estate market be like over the coming months, and how can buyers best prepare before entering the market?

For many buyers, the ongoing inventory shortage will represent the biggest challenge along the path to homeownership. The San Francisco Bay Area has experienced a relative inventory shortage for quite some time. And according to the Realtor.com report mentioned above, supply levels have dropped even further over the past year.

This will create challenges for Bay Area home buyers well into 2024. But for every home-buying challenge, there’s a strategy that can help you overcome it.

Here are some ways to succeed in a tight real estate market:

• Get pre-approved for a mortgage. This shows sellers that you are a serious buyer who is financially qualified to purchase their home.
• Be prepared to act quickly. Homes in tight markets often sell quickly, so you need to be ready to make an offer as soon as you find a home you love.
• Be flexible with your search criteria. Consider expanding your search area or looking at different types of homes than you originally planned.
• Work with a skilled agent. A good real estate agent can help you find the right home for your needs and negotiate the best possible price.
• Be willing to compromise. You may not be able to get everything you want in a home in a tight market, so be prepared to compromise on some things.
• Consider a fixer-upper. Fixer-uppers may be less competitive than move-in ready homes.
• Consider waiving your contract contingencies. While it brings additional risks into the picture, this strategy can also make your offer more attractive to sellers.
• Be patient. It may take some time to find the right home in a tight market, but don’t give up.

Ready to get pre-approved? Having a pre-approval letter can increase your chance for success when making an offer on a home. And that’s where we can help. We’ll review your current financial situation to determine how much you’re able to borrow. Please contact our staff with any questions you have or to start the pre-approval process!