Bay Area Home Prices Not Falling in 2020, According to New Report

With all of the economic stumbling blocks we’ve been through in recent months, you might expect Bay Area home prices to be falling in 2020.

As it turns out, that’s not the case at all. New data reported by the California Association of REALTORS® (C.A.R.) showed that home prices are still rising in the Bay Area, and across most of California.

Positive Trends in New C.A.R. Report

At present, the San Francisco Bay Area real estate market can be summed up with the following statement. Sales are rebounding, inventory remains tight, and home prices show no sign of falling anytime soon.

On August 17, C.A.R. published and update on real estate trends in the Bay Area and across California. That report showed that home prices in the Bay Area are not falling, as of summer 2020. In fact, they are rising at a pretty good pace in many housing markets across the state.

That might seem counterintuitive, given the ongoing coronavirus situation and resulting economic issues. But there’s no denying the numbers. So, let’s take a look at those numbers.

According to the above-mentioned report, the median home price in California rose to $666,320 in July 2020. That was an increase of 6.4% from the previous month and a gain of 9.6% from a year earlier. That’s for the state as a whole.

Within the San Francisco Bay Area, home prices rose 5% from June to July of this year. Annually, Bay Area home values were up 10% in July compared to the same month last year.

It’s the monthly figure in particular (the 5% increase from June to July of this year) that gives us a sense of what’s happening right now. It tells us that house values continue to show strength, even several months into the coronavirus pandemic.

Related: Average down payments in Bay Area

Bay Area Home Prices Not Falling in 2020

That answers the question we started with. Are home prices in the Bay Area falling as a result of the coronavirus? Clearly, the answer is no.

To be clear, this is a broad analysis that covers all nine counties within the Bay Area. So there might be some cities and individual housing markets where prices are soft and/or leveling off. But looking at the broader San Francisco Bay area as a whole, home prices are obviously not falling right now.

This is a good sign for buyers who are thinking about making a purchase. Some would-be buyers are hesitant to move forward, worried that their home’s value will drop after the deal is done. That’s a valid concern, especially in times of economic uncertainty.

No one can predict future real estate conditions with complete certainty. But current data and trends should go a long way to inspire home buyer confidence. If the Bay Area housing market can handle everything that has been thrown at it over the past few months, it will probably continue to chug along through 2020 and into 2021.

Low Inventory Playing a Role

Inventory is part of the reason why Bay Area home prices are not falling in 2020, but rather rising steadily. Or should we say a lack of inventory.

In most local housing markets in the Bay Area — and across California as a whole — home buyer demand currently exceeds the number of properties available for sale. This supply and demand imbalance is putting upward pressure on home prices in our region and also statewide.

According to the C.A.R. report mentioned earlier, the Bay Area was tied with the Central Valley region for having the lowest housing inventory in July 2020. Both of those regions had about a 1.8-month supply of homes for sale. (That’s a theoretical measurement that helps us track inventory levels over time.)

That 1.8-month figure is well below what’s considered to be a balanced housing market. This means there aren’t nearly enough homes listed for sale to satisfy the level of demand from buyers.

And there is clearly strong demand from home buyers right now. For evidence of this, you need look no further than recent sales statistics. As the C.A.R. report noted:

“July sales rose 28.8 percent from 339,910 in June and were up 6.4 percent from a year ago, when 411,630 homes were sold on an annualized basis.”

Historically Low Mortgage Rates Enticing Buyers

Mortgage rates are another reason why Bay Area home prices aren’t falling in spite of the pandemic. As of late August 2020, we are seeing some of the lowest rates of the last 50 years.

During the week ending on August 27, the average rate for a 30-year fixed mortgage was down to 2.91%. That’s based on the long-running survey conducted by Freddie Mac. Today’s rates are hovering near the record low set just a few weeks ago, when 30-year mortgage rates dropped to an average of 2.88%.

A couple of years ago, we were talking about “low” mortgage rates when the 30-year average was hovering around 4.5%. Now, in summer of 2020, we are looking at average rates below 3%.

This represents a huge opportunity for borrowers, and it’s part of the reason why Bay Area home prices are still rising. Buyers are rushing to take advantage of today’s low-rate environment. This has boosted demand at a time when inventory remains low. Prices tend to rise under such conditions.