Report: Bay Area Housing Market Might Be Cooling Down in 2021

In 2020, the San Francisco Bay Area real estate market accelerated like never before. The first half of 2021 has brought more of the same.

But now a lot of people are wondering: Will the Bay Area real estate market start cooling later this year? Will it slow down a bit going forward, following many months of overheated activity?

A recent report suggests that the Bay Area housing market might be cooling slightly, going into the second half of 2021. Emphasis on the word slightly. Despite a slowdown in home sales, the San Francisco Bay Area real estate market remains highly competitive due to an ongoing inventory shortage.

CAR: Housing Market Is ‘Cooling’ Slightly

On June 16, the California Association of Realtors (C.A.R.) published a report that suggested the state’s real estate market might be cooling down a bit in 2021. According to that report, home sales statewide have “moderated” due to buyer “fatigue” and other factors.

According to C.A.R. President Dave Walsh:

“The overheated housing market is showing signs of a much-needed cooling and could be a sign of waning buyer interest as the torrid pace of home price increases and buyer fatigue adversely affected demand.”

He added that some would-be home buyers across the state seem to be taking a bit of a pause, hoping more listings will come onto the market as the economy reopens. This could account for the reduction in sales.

Related: Buying a home now versus 2022

Catching Up With Bay Area Real Estate Trends

Here in the San Francisco Bay Area, home prices are still climbing in most cities. But sales have slowed a bit, suggesting that the regional housing market might be cooling in terms of overall activity.

Home prices have risen sharply over the past year or so. According to the CAR report, the median sale price for existing single-family homes in the San Francisco Bay Area rose by nearly 39% from May 2020 to May 2021.

Home sales, on the other hand, have actually declined a bit in recent months. From April to May of 2021, the total number of sales in the metro area dropped by -5.2% .

This slowdown in sales activity would seem to suggest that the Bay Area housing market might be cooling in 2021. At first glance, anyway. But there could be another explanation for the decline. And that is a lack of inventory.

There are currently a lot more home buyers in the real estate market than there are properties for sale. This has been the story for many months now.

But we are starting to see some positive signs, in terms of inventory. According to the CAR report mentioned above, housing market inventory in the Bay Area rose a bit in May 2021. Even more homes might come onto the market over the coming months, now that the vaccine rollout has tamped down pandemic-related concerns.

Given all of this, we could see an increase in home sales going forward due to a rise in inventory.

The Takeaway: Still a Highly Competitive Market

Here’s the take-home message from all of these trends and data. Recent reports suggest that the Bay Area real estate market is cooling off a bit, going into the second half of 2021.

But don’t let that fool you. The local housing scene is still highly competitive, mainly due to a stark imbalance between supply and demand.

While the Bay Area real estate market has slowed a little in terms of sales, bidding wars and multiple-offer scenarios are still a common feature. Additionally, reports show that some home buyers are still offering more than the original asking price. These and other indicators point to a fast-paced real estate market with strong demand from buyers.

So while we might see a cooling trend in the Bay Area real estate market later this year, it doesn’t change the overall dynamic between buyers and sellers. Home sellers still have the upper hand in this market, due to the inventory situation mentioned earlier. And that probably won’t change anytime soon.

Related: 5 home-buying challenges in 2021

Going forward, we could see additional reports and headlines about the San Francisco Bay Area real estate market cooling or slowing. But it’s important to maintain some perspective, as to what these terms mean. If a white-hot housing market “cools” slightly, it’s still going to be pretty darn hot.

Home buyers should bear all of this in mind, and be prepared for some stiff competition when entering the Bay Area real estate market in 2021 or 2022.