Update on Bay Area Home Price Trends and a Forecast Into 2024

Home prices in the San Francisco Bay Area have been on quite the roller coaster ride over the past few years. This is true for most cities across the country, and the overall cause is the same.

In this article, we will provide an update on Bay Area home price trends in 2023, along with a long-range forecast stretching into 2024.

Here’s the short version, in case you’re in a hurry:

After declining for most of the past year, home prices across the San Francisco Bay Area appear to be rebounding and are expected to start rising again over the coming months. Tight inventory conditions and steady demand are the main reasons for this.

Bay Area Home Prices Rebounding In 2023?

On June 19, the California Association of Realtors (C.A.R.) published an updated housing market report with data for the state as a whole, as well as individual counties and metro areas. According to that report, home prices across the Bay Area region have declined over the past year.

That same trend has played out in cities and metro areas all across the country. Essentially, the real estate market has “corrected” itself following the overheated price growth that coincided with the COVID pandemic.

To quote the June 2023 C.A.R. report:

“All but one major region experienced a dip in median price from a year ago, but all declines were 4 percent or less. The Central Valley (-4.0 percent) registered the biggest drop of all regions, with seven of its 12 counties experiencing price decline from a year ago. The Far North (-2.8 percent) posted the second largest drop in median price, followed by the San Francisco Bay Area (-2.7 percent) and Southern California (-1.8 percent).”

But this price decline was recorded over the past year. When we drill down and look at the latest monthly data, a different picture emerges.

The same C.A.R. report showed that San Francisco Bay Area home prices rose by 1.8% from May to June of 2023. Alameda and Contra Costa counties posted even bigger monthly gains, at 3.6% and 4.7% respectively. So it seems that the downturn in prices might be nearing its end, with a rebound period on the horizon.

Positive Forecast for Housing Market Into 2024

According to the latest data from Zillow, the median home value for the San Francisco-Oakland-Hayward metropolitan area was slightly north of $1.1 million as of July 2023. Prices declined by about 9.2% over the past 12 months, based on their estimates.

But the company also issued a positive home-price forecast for the Bay Area region, stretching into 2024. Specifically, they predicted that the median home value in the area would rise by 2.2% from June 2023 to June 2024.

That would be more in line with historical price growth averages going back many decades. The high double-digit gains we experienced in 2020 – 2021, on the other hand, were miles from the norm. So the real estate market is essentially getting back to normal, at least where price growth is concerned.

The chart below shows average home values for the San Francisco-Oakland-Hayward metro area, going back nearly a decade. You can see how the trend line grew steeper during the pandemic and then peaked in the fall of 2022. You can also see how prices declined during the first part of 2023, but now appear to be turning upward again.

Similar forecasts have also predicted that home prices nationwide will begin to climb again later this year and into next. If those predictions prove accurate, buyers might begin to feel a renewed sense of urgency.

The truth is, no one can predict future real estate market trends with complete accuracy. But here in the Bay Area, the current supply-and-demand situation suggests that home prices could begin to rise steadily later this year and into 2024.

Inventory levels have a lot to do with these trends and predictions. So let’s shift gears and talk about the supply situation across the Bay Area real estate market.

Tight Inventory Is Becoming a Factor Again

Through most of last year, the San Francisco Bay Area experienced an increase in housing market supply levels. This was part of a nationwide cooling trend brought on by rising mortgage rates and other factors. Home buyer demand declined, leading to an increase in the number of properties for sale in the area.

But around the start of 2023, an interesting trend occurred. Those higher mortgage rates that caused buyers to step back also made some homeowners reluctant to list their properties for sale.

A person who purchased a home three or four years ago might have an existing mortgage rate in the low 3% range. But today’s average rates are closer to 7%. So a lot of would-be sellers are hesitant to list their properties, out of concerns they will take on a much higher rate with their next purchase.

This and other factors have caused inventory levels to decline over the past six months or so. Granted, today’s inventory levels aren’t as low as they were in the midst of the pandemic. But it is still a very tight market from a supply standpoint.

These trends have increased competition among buyers and put upward pressure on home prices all across the San Francisco Bay Area. That’s partly why the downturn in prices appears to be coming to an end, with forecasts suggesting more growth over the next year.