East Bay Housing Market Heating Up in 2023 Due to Low Inventory

In this report: an update on the East Bay housing market in 2023, with an emphasis on recent inventory declines.

The eastern part of the San Francisco Bay Area (locally referred to as “the East Bay”) experienced a real estate market cooldown in 2022. That same trend affected cities and metro areas all across the United States. Rising mortgage rates caused buyers to step back from the market, resulting in slower home-price growth and even some declines in some areas.

But a lot has changed since then, especially within the East Bay real estate market. A recent report showed that inventory levels have declined sharply within Alameda and Contra Costa County, the two counties that make up the East Bay region.

Additionally, home prices within the East Bay housing market are beginning to climb again, after dropping for the first half of 2023. These trends show that there is still plenty of demand from buyers across Alameda and Contra Costa County, and that the East Bay real estate market is becoming more competitive during the second half of 2023.

From Red-Hot to Cool to Warm Again

Like most housing markets across the United States, the eastern part of the San Francisco Bay Area experienced a surge in home-buying demand during the COVID years. This was partly fueled by people moving out of the city of San Francisco and into the surrounding communities.

As a result of this trend, the East Bay real estate market accelerated and heated up like never before. We experienced unprecedented price growth, along with intense competition among local home buyers. You probably know this much already.

You might also know that the real estate market cooled down considerably during 2022, when mortgage rates more than doubled. But you might not know that things are heating back up again, partly due to tight inventory conditions.

East Bay Housing Inventory Declined in 2023

In July 2023, the California Association of Realtors published a housing market update including data for the state as a whole, along with all counties and metro areas.

According to that report, the East Bay real estate market experienced the biggest drop in inventory levels over the past year or so. Specifically, they singled out Alameda County and Contra Costa County for having the biggest decline in total active real estate listings, from June 2022 to June 2023.

To quote their July 2023 report:

Nearly 80 percent of all counties experienced a dip in active listing from last year, and 35 of them dropped by double-digits on a year-over-year basis. Alameda (-64.2 percent) recorded the sharpest year-over-year decline in June, followed by Contra Costa (-62.1 percent) and Mono (-59.7 percent).

As of June 2023, both of the East Bay counties had about a 1.2-month supply of homes for sale. That’s miles below what is considered to be a “balanced” real estate market, and it presents certain challenges for home buyers in the East Bay region.

In June of last year, Alameda County had about a 1.8-month supply of homes for sale, while Contra Costa County was at 2.1 months. so what we have here is a situation where an already constrained or “tight” real estate market has gotten even tighter over the past 12 months.

Home Prices Starting to Rise Again

This reduction in housing market inventory has also put upward pressure on prices. After declining for the past six months, home values in the East Bay region are starting to rise once again.

According to the California Association of Realtors report mentioned above, the median sale price for single-family homes in Alameda County rose by 3.6% from May to June of 2023. During that same timeframe, neighboring Contra Costa County posted a 4.7% increase in the median selling price.

This is noteworthy for a couple of reasons:

• For one thing, a one-month price increase within the 3% to 5% range is fairly significant and well above historical averages.
• Additionally, most of the other counties within the Bay Area (including Marin, San Francisco, San Mateo and Solano) experienced a decline in home prices from May to June.

These trends are directly related. According to the National Association of Realtors: “Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”

In June of 2022, the median home value for Alameda County peaked at an all-time high of $1,186,000. But after that, prices began to decline as part of a nationwide real estate market cooling trend. By May 2023, the median price in Alameda County was back down to $1,059,000.

But it seems that prices have bottomed out and are now rising. According to Zillow, the median price point for Alameda County has risen for the past couple of months.

A nearly identical trend has played out in Contra Costa County, though the numbers are a bit lower. The median price in Contra Costa rose to an all-time high of $873,000 in June of last year, and subsequently fell to $798,000 by spring of 2023.

But here again, the trend appears to be reversing, with prices starting to climb from month to month during the summer.

What It Means for East Bay Buyers

Anyone who is planning to buy a home in the East Bay counties of Alameda or Contra Costa should pay close attention to these trends.

Many economists and analysts believe that the current housing market inventory shortage could continue through the rest of this year and into 2024. If so, home prices could continue to inch upward over the coming months, creating a sense of urgency for East Bay buyers.

Tight inventory conditions tend to increase the competition level among buyers as well. So, in addition to becoming more expensive, the East Bay real estate market could also become more competitive through the rest of 2023.

We closely monitor real estate market trends in Alameda and Contra Costa County, and elsewhere across the Bay Area, in order to keep our readers informed. So stay tuned to our blog for in-depth and continued coverage!