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Home sales in the San Francisco Bay area have been falling for months, but in September buyers pulled back in an even bigger way.
Sales of both new and existing homes plunged nearly 19 percent compared with September 2017, according to CoreLogic. It marked the slowest September sales pace since 2007 and twice the annual drop seen in August.
"Job growth and demographic trends have created plenty of housing demand, but the combination of higher home prices and increasing mortgage rates have priced out some buyers and prompted others to take a wait-and-see stance," said Andrew LePage, a CoreLogic analyst who had much the same commentary in a report Tuesday on why sales in Southern California fell sharply as well.
He did note, as with Southern California, that this September had one less business day for recording transactions. Adjusting for that, the annual sales decline would be about 15 percent – still one of the larger declines in recent years.
The Bay Area report covers homes and condominiums sold in Alameda, Contra Costa, Marin, Napa, Santa Clara, San Francisco, San Mateo, Solano and Sonoma counties.
Unlike in Southern California, where home price gains shrank to 3 percent annually, the median price paid for Bay Area homes in September, $815,000, was still up 9.3 percent compared with a year ago. In both May and June, the median price hit $875,000, the highest on record.
"Although still larger than in many regions, the 9.3 percent year-over-year gain in the Bay Area's median sale price was the lowest in 15 months," LePage said. "Price growth could continue to weaken if sales continue to slow amid a rise in listings."
He said this would be a welcome development for possible homebuyers, although there still could be a hurdle: monthly mortgage payments pushed up by higher rates.
"The principal-and-interest mortgage payment on the median-priced home was up 21 percent on a year-over-year basis this September because mortgage rates increased about 0.8 percentage points over that period," LePage said.
Buyers in the Bay Area had been hampered by high prices due to very low supply, but that dynamic is changing. Active listings in October were up 130 percent year-over-year in the San Jose-Sunnyvale-Santa Clara market and up 42 percent in San Francisco-Oakland-Hayward, according to realtor.com.
"Buyers have been struggling for four years to find homes in their price range, while dealing with bidding wars and multiple offer situations," said Danielle Hale, chief economist for realtor.com. "The inventory increase will not solve the problem overnight, but it should provide some relief to those still in the market, especially if the growth we're seeing in more affordable homes and condos holds steady."
Affordability, however, continues to weaken, as mortgage rates rise and home values grow. While inventory is up, it is up from a critical shortage, and supply and demand are still not in balance.