How Bay Area Buyers Can Capitalize on a Cooling Real Estate Market

If you’ve been following real estate market news here in the San Francisco Bay Area, you’ve probably heard that the local housing market is cooling.

It’s true. In fact, recent reports have shown a cooling trend in real estate markets all across the country. This is partly due to a rise in both home prices and mortgage rates.

For the past couple of years, Bay Area home buyers have been frustrated by bidding wars, rapidly rising prices, and other challenges. Now, as we had further into the summer of 2022, Bay Area home buyers can capitalize on a cooling real estate market.

How a Cooler Housing Market Benefits Buyers

Below, we’ve outlined three ways that home buyers in the Bay Area could benefit from a cooler housing market. Over the coming months, buyers might have an easier time finding a house and negotiating the sale price. They might also enjoy a slightly slower pace, compared to what we’ve seen over the past couple of years.

1. Buyers might have an easier time finding a home.

Last month, housing market analysts from Realtor.com published a report that showed an increase in inventory levels nationwide. According to that report, housing market inventory rose by nearly 19% last month, compared to June 2021.

The San Francisco Bay Area real estate market experienced an even bigger increase in supply. The total number of active property listings in the San Francisco-Oakland-Hayward metropolitan area rose by roughly 46% over the past year or so.

This is one reason why the Bay Area real estate market seems to be cooling in the second half of 2022. With more homes coming out of the market, buyers don’t have to compete so fiercely with one another. It also puts more pressure on sellers, when it comes to pricing and negotiating.

Overall, this is good news for home buyers in the Bay Area. While inventory levels remain low by historical standards, this recent uptick in supply should make it easier for buyers to find a property within their budgets.

Granted, the real estate market is still pretty tight. But it seems to be moving in a more buyer-friendly direction, with more homes coming onto the market.

2. They might have more negotiating leverage, as well.

In a seller’s market (which is what we’ve been in for quite some time now), sellers tend to have more negotiating leverage. This is usually due to tight supply conditions along with strong demand.

A buyer’s market is essentially the opposite. It occurs when buyers have more negotiating leverage, often due to a surplus of houses on the market.

In terms of supply and demand, we are still experiencing a seller’s market in the Bay Area. But that appears to be changing rapidly. Recent housing market reports and data have shown some early signs of a shift, the kind that could benefit buyers.

For example, in the Realtor.com report mentioned above, 15% of Bay Area homes listed for sale in June 2022 had a price reduction. This shows that sellers are starting to lower their prices more frequently, when compared to a year ago.

During the latter part of 2022, and into 2023, Bay Area home buyers could have a bit more negotiating leverage when it comes to the sale price and other terms.

3. A slower market pace offers more time for research.

Buying a home in a red-hot housing market can be challenging and frustrating. Just ask anyone who has purchased a home in the Bay Area over the past couple of years. In an overheated real estate scene, bidding wars and multiple-offer scenarios are the order of the day.

Lately, however, we are seeing far fewer of these bidding war scenarios. The overall pace of the real estate market appears to have slowed down in recent months, and this too could benefit home buyers in the Bay Area.

Otto Catrina, president of the California Association of Realtors, recently wrote:

California’s housing market continues to moderate from the frenzied levels seen in the past two years, which is creating favorable conditions for buyers who lost offers or sat out during the fiercely competitive market.

When a real estate market slows down, buyers have more time to evaluate properties, negotiate with sellers, and make informed decisions. They have more time for research and consideration. This would be a welcome change from the frenzied housing market pace we saw throughout 2021.