Will Supply Gains Slow Home-Price Growth in the Bay Area, in 2021?

For the past year or so, we’ve been writing about tight inventory conditions within the Bay Area housing market, and how it has increased competition among home buyers. And those conditions persist, for the most part.

But a new real estate market report showed that housing supply and inventory levels in the Bay Area have increased recently. Specifically, the report showed a significant increase in the number of new listings within the Bay Area housing market. This means there are more homes coming up for sale today than in past months.

It’s too early to know whether this is a short-term fluke or the beginning of a sustained trend. But it’s a positive sign nonetheless, from a home buyer’s standpoint. If more and more listings come onto the market, Bay Area buyers will stand a better chance of finding a suitable property within their price range.

Real Estate Listings Way Up in Bay Area

In early January of 2021, Realtor.com® published its “Monthly Housing Trends Report” with data through the end of December 2020. Among other things, that report showed a sizable increase in the number of new property listings within the Bay Area housing market.

In fact, out of the 50 U.S. metro areas listed in that report, two Bay Area metros were ranked #1 and #2.

“The West’s surge in newly listed homes is primarily attributed to San Jose, Calif. (+123.8%) and San Francisco(+98.9%), which saw far more new listings this December compared to 2019,” the report stated.

These findings are significant for a couple of reasons:

1. Bay Area housing markets — such as San Jose, Oakland, Hayward and San Francisco — have suffered from chronic supply shortages for months. Low inventory levels have made things challenging for home buyers in these areas. So any measurable increase should be welcomed.
2. Tight supply conditions have also contributed to sharply rising home prices in most cities across the Bay Area. An increase in new listings could slow home-price appreciation during 2021. That’s something to watch, given the affordability issues that have long plagued the Bay Area housing market.

“We eventually expect to see improvements in the supply of homes for sale, especially in the second half of the year,” said Realtor.com chief economist Danielle Hale. “Until then, finding a home will continue to be a top challenge for buyers across all price ranges.”

Other Housing Market Trends at the Start of 2021

In addition to the inventory update mentioned above, the Realtor.com report provided other insights into the Bay Area real estate market at the start of 2021. The median list price for our region has also increased measurably over the past year or so.

• In the San Jose-Sunnyvale-Santa Clara metro area (also known as the South Bay and Silicon Valley), the median listing price for homes rose by 9.9% from December 2019 to December 2020. The median was hovering around $1,181,000 at the start of 2021.
• In the San Francisco-Oakland-Hayward metro area, the median list price for properties rose by 10.9% during the 12-month period mentioned above. The median listing price for this metro area hit $995,050 last month.

Meanwhile, the median number of “days on market” declined over the past year or so, for most housing markets across the Bay Area. This means that homes are now selling faster in these areas, when measured year over year. And that’s not surprising, when you consider the tight inventory situation mentioned above.

The San Jose-Sunnyvale-Santa Clara metro area had the biggest decline in its median days on market, with a 16% drop year over year.

The South Bay real estate market could be one of the hottest in the country in 2021. In a recent report identifying the nation’s hottest housing markets, Realtor.com ranked the San Jose-Sunnyvale-Santa Clara metro area #2 among the nation’s top 100 metro areas. Tight supply and strong demand are the primary factors driving this forecast.

Bay Area Buyers, Start Your Engines

So, what can Bay Area home buyers expect based on these recent reports and data? The first — and probably most important — takeaway is that new listings are coming onto the market. That’s a positive development from a buyer’s perspective. Over time, that trend could ease competition and cool the market a bit.

In the meantime, however, supply shortages could make buying a home in the Bay Area during 2021 challenging for some folks. That’s especially true at the lower end of the price range, where inventory is tightest. Patience and persistence are important traits for the modern house hunter.

Tips for buyers who are planning to enter the Bay Area housing market in 2021:

• Broaden your search if possible, to include areas around your “first choice” neighborhood(s).
• Make a strong first offer by reviewing recent homes sales in the area.
• Have your financing lined up ahead of time (e.g., mortgage pre-approval, budgeting, earnest money, etc.).
• Remember that sellers currently have the upper hand, in terms of negotiation.

Need mortgage financing? Bridgepoint Funding serves the entire Bay Area and offers a wide range of mortgage loan products. Please contact us if you have mortgage-related questions or would like to receive a quote.