In a previous article, we pointed out that seller concessions are becoming more common in…
There’s been a slew of good news for Bay Area home buyers lately. After two years of highly competitive and often frustrating conditions, buyers are starting to catch a break.
The latest sign: More and more sellers in the San Francisco Bay Area are reducing their asking prices. This means buyers could have more negotiating leverage through the rest of 2022 and into 2023.
Bay Area Sellers Are Reducing Their Prices
The real estate market continues to change, and this time it can be measured by the number of price reductions. For the past 18 months or so, home buyers in Bay Area have had to contend with fierce competition and multiple-offer scenarios. They’ve also had very little negotiating ability, partly due to tight inventory conditions.
But a recent report from Realtor.com showed that change is in the air. As is turns out, Bay Area sellers are reducing their list prices with more frequency these days.
To quote their August 2022 report:
In early signs of potential softening demand for higher-priced homes, yearly growth in pending listing prices was smaller in July (+12.4%) than in June (+13.9%), marking the third consecutive month of deceleration. Additionally, 19.1% of homes had their price reduced in July, up from 9.4% in 2021 and surpassing the typical 2019 share (18.0%).
The above data relate to the nation as a whole. The Bay Area real estate market had a similar percentage of price reductions. During July of 2022, 18.4% of property listings within the San Francisco-Oakland-Hayward metropolitan area had a price reduction. That was a 12% increase from a year earlier.
The takeaway: More and more sellers in the Bay Area housing market are dropping their prices, after initially listing their homes at a higher price. That says something about where the market is going.
One Reason: More Homes Coming onto the Market
The August Realtor.com report also showed an increase in the number of real estate listings within the Bay Area. The total number of active listings within the San Francisco-Oakland-Hayward metro area increased 51% in July 2022, compared to a year earlier.
These trends go hand-in-hand. Sellers appear to be more willing to reduce their asking prices these days, compared to a year ago. And inventory growth has a lot to do with it.
When more and more homes come onto the market, it increases the pressure on sellers. They have more listings to compete with, so they tend to be more flexible with pricing and negotiations.
Overall, we are still experiencing seller’s market conditions across most of the San Francisco Bay Area. But at long last, things appear to be moving in a buyer-friendly direction.
What It Could Mean for Buyers in 2022 and 2023
To recap: Price reductions are becoming more common within the Bay Area housing market. Faced with increased competition from other listings, sellers have taken note.
But what could all of this mean for home buyers, during the latter part of 2022 and into 2023?
Among other things, we might see a more balanced real estate market later this year and next. The overall pace of the market could ease up, compared to the frenzy of 2021. This would give home buyers more time to consider their options, and more leverage when the time comes to make an offer.
In the company’s latest report, Realtor.com chief economist Danielle Hale said:
“The U.S. housing market continues to move toward more evenly balanced supply and demand compared to the 2021 frenzy. Our July data shows elevated mortgage rates left many buyers tightening their budgets and sellers responding with price reductions, while home shoppers who kept searching saw more available options.”
If inventory growth continues over the coming months, we could see an even higher percentage of price reductions. This would be a welcomed change for home buyers.
It Still Pays to Be a Savvy House Hunter
Home buyers planning to enter the Bay Area real estate market over the coming months should still bring their ‘A’ game. As mentioned, the housing situation is becoming a bit more “friendly” toward buyers. But the ongoing inventory shortage could continue to challenge house hunters for a while longer.
The bottom line: Be ready to hit the ground running, as you begin your home search.
- Spend some time researching real estate market conditions in the area where you plan to buy.
- Establish a budget for yourself with a maximum monthly housing payment.
- If you’re going to use a mortgage loan, get pre-approved before house hunting.
- Find an experienced agent to help you navigate the local market.
All of these things can increase your chance for success, when buying a home in the San Francisco Bay Area.