Will Bay Area Home Prices Go Down in 2021, or Keep Rising?

It’s a new year, and it brings a whole new set of questions from Bay Area home buyers. One of the most common questions is: Will Bay Area home prices go down in 2021, or continue rising as they did during 2020?

There’s no way to answer that question with complete certainty. But based on current housing market trends, it seems unlikely that housing prices in the Bay Area will drop in 2021. In fact, recent forecasts predict that home values across the region will continue to climb in 2021 — perhaps even outpacing the national average.

Will Bay Area Home Prices Go Down in 2021?

Home prices in most California cities rose steadily during 2020, despite the broader economic effects of the coronavirus pandemic. According to a January 15th report from the California Association of Realtors (C.A.R.), the statewide median sale price for existing single-family homes rose by 16.9% during 2020, reaching $717,930.

The San Francisco Bay Area, in particular, also saw significant price gains during 2020. According to that same C.A.R. report:

“At the regional level, all major regions posted an increase in the median price from last year by more than 10 percent. The Central Coast region had the largest year-over-year price increase in December, gaining 17.9 percent from a year ago. The San Francisco Bay Area had the second largest increase of 16.4 percent…”

That’s where we are right now, as of mid-January. But what about the coming months? Will home prices go down in the Bay Area, later in 2021? Will they continue to climb? Or will they level off and “plateau” over the coming months?

If recent forecasts are a reliable indicator, home prices in most parts of the Bay Area could continue rising throughout 2021.

To gain some deeper insight into the subject, we turned to the economic research team at the real estate data company Zillow. There housing market analysts track home-price trends nationwide and often make predictions about what they think prices will do in the future.

Home Values: Past, Present, and Possible Future

Below, we’ve compiled a list of Zillow’s most recent forecasts for major cities across the San Francisco Bay Area. The “forecast” line shows how they think prices will change over the next year or so, from January 2021 to January 2022. The “change” line shows how home values actually changed during 2020.

Concord, CA
Current median: $570,890
8.0% 1-year change
9.8% 1-year forecast

Fremont, CA
Current median: $1,162,571
7.0% 1-year change
10.7% 1-year forecast

Hayward, CA
Current median: $738,112
10.1% 1-year change
11.2% 1-year forecast

Oakland, CA
Current median: $841,775
11.0% 1-year forecast
9.4% 1-year change

San Francisco, CA
Current median: $1,385,625
-1.1% 1-year change
7.5% 1-year forecast

San Jose, CA
Current median: $1,104,081
15.2% 1-year change
12.1% 1-year forecast

As you can see, researchers do not expect Bay Area housing prices to go down in 2021. On the contrary, they expect home values in the area to rise by a signifiant amount over the coming months — surpassing many other U.S. cities.

Granted, these are just predictions based on current conditions within the housing market. They are the equivalent of an educated guess. But they’re also very realistic, based on where we are right now.

Related: East Bay End-of-Year Summary

Supply and Demand Imbalance Continues

The Bay Area real estate market is currently experiencing low inventory levels combined with strong demand from home buyers. This imbalance is putting tremendous upward pressure on home prices, all across the region.

That’s the number-one reason why housing prices rose steadily over the past year. It’s also why housing analysts (like those at Zillow) expect Bay Area home values to continue rising in 2021.

Most cities across the San Francisco Bay area currently have less than a two-month supply of homes available for sale. This is a theoretical measurement that allows us to track inventory levels over time. The bottom line here is that Bay Area housing market inventory is currently well below what’s considered to be a balanced real estate market.

This means the market tends to favor sellers over buyers. There’s a high level of competition among buyers right now, as they attempt to outmaneuver one another to secure properties that are in short supply.

According to C.A.R. Vice President and Chief Economist Jordan Levine:

“Home prices, which usually peak during the summer, were unseasonably strong in December. The imbalance between supply and demand continues to fuel home price gains as would-be home sellers remain reluctant to list their homes during the pandemic…”

So there you have it, a “best guess” that answers a common question among home buyers: Will housing prices in the Bay Area go down in 2021?

Based on current conditions within the real estate market — combined with strong forecasts from housing analysts and economists — it seems likely that home values in most Bay Area cities will continue to climb during 2021. Or at least for the foreseeable future.

Disclaimer: This article includes predictions issued by third parties not associated with our company. Real estate and economic predictions are the equivalent of an educated guess and should be treated as such.