Housing prices in the Gulf region showed no signs of slowing in March as buyers rushed to take advantage of low interest rates before the recent turbulence in the economy boosted the cost of borrowing money.
The prices of the existing single-family houses jumped by 21.7% compared to the previous year, which brought the average price of housing in the Gulf region to 1.25 million dollars. In the county with the highest price, San Mateo, the average price is now just under $ 2 million, according to sales data from CoreLogic and DQNews.
High prices and rising mortgage rates are closing the door to home ownership for even more middle-class families, agents say. On Wednesday, the Federal Reserve raised interest rates by another half percent, or 50 basis points, the biggest increase in more than two decades. The interest rate on a standard, fixed 30-year mortgage is now around 5.3%.
“Our poor middle class is still being beaten,” said East Gulf agent Janine Hunt. There’s a phrase we hear often: “I can’t even afford what I don’t like.”
The arrival of low stocks and high demand have led buyers to dig deeper into savings and sellers to reap unexpected profits from seven-figure offers above their list price.
Alameda County provided the most heat in the hot market, with the average price rising 30% year-on-year to $ 1.28 million. Housing prices in Santa Clara County jumped 26% to $ 1.8 million, San Francisco rose 14% to $ 1.83 million, San Mateo County rose nearly 10% to $ 1.92 million, and Contra County Costa rose 5.8 percent to $ 899,000, according to CoreLogic.
CoreLogic chief economist Frank Nottaft said demand rose as buyers rushed to take advantage of lower interest rates. The combination of higher prices and rising interest rates on mortgages has begun to undermine the affordability of many home buyers. “Silicon Valley and the Gulf region are the child of the poster,” he said.
U.S. home prices rose 20.9 percent in March from a year earlier, the highest jump in 12 months since CoreLogic began tracking the measure 45 years ago.
Total sales of existing single-family homes fell 7% in the region, with transactions falling in every county except Napa.
Agents say many homeowners are reluctant to put up a sign for sale in their front yard. Gulf sellers remain concerned about their income taxes or feel locked in low interest rates on their current mortgages. Russia’s invasion of Ukraine, inflation and the turbulent stock market have also added uncertainty to the real estate market.
Burlingame agent Caroline Dinsmore said competition remains high as buyers want to enter a home before interest rates rise again. “There’s inventory,” Dinsmore said, “but there are a lot more buyers than inventory.”
The $ 2 million single-family homes in San Mateo County are “kind of entry-level,” she said. Buyers are still looking for renovated homes, but are often content with clean properties in need of several modern renovations, she said.
Even sales of apartments have increased as buyers for the first time look for cheaper entry into the real estate market, she said. Townhouses and apartments, with smaller units and common areas, fell out of favor during the pandemic. The average price for an apartment in the Gulf region increased by 12% in March compared to the previous year, from $ 735,000 to $ 825,000.
The bidding wars in the Gulf region and the wild premiums over catalog prices continued.
Saratoga agent Mark Wong monitored local sales in April in Silicon Valley. In the desired cities, 57 properties were sold for more than $ 500,000 above the list price, and 10 of these homes were sold for more than $ 1 million above demand.
Some agents are pricing homes well below market prices to provoke bidding wars, and competing buyers are going to win, he said. “This is the Silicon Valley mentality,” Wong said. “Nobody wants to lose, everyone wants to win.”
In recent months, more and more homes are offered for sale, which gives buyers several more choices. Speaking to buyers, Wong said: “I think we’re starting to see the light at the end of a very, very, very long tunnel.
More and more buyers are increasing down payments to cut monthly costs, agents say. Rising interest rates can add hundreds or thousands of dollars to a mortgage payment.
But this is still a strong market for sellers. Hunt cites one example: a $ 1.7 million Berkeley retainer that sells for 30 hours for $ 2.8 million.
The house with three bedrooms and two bathrooms was located on a large plot with a villa in the backyard. The sellers wanted to make a deal quickly, and the buyers were ready to ignore the need to patch 100-year-old plaster and update some features. “She was cute, but she needed love,” Hunt said.
But real estate experts expect some cooling by the end of the year. Interest rates are expected to rise as the Fed fights inflation. Fewer buyers are expected to enter the high-priced market. “We expect prices to rise,” Notaft said, “but more slowly than in the last 12 months.”