A key metric is another sign that the Bay Area’s housing market is coming back down to earth.
For the first time since early 2012, the average home in the San Francisco metro area is selling for less than its asking price, as first reported by The San Francisco Chronicle.
Data show that the average sale-to-list percentage in the San Francisco metro area, which includes San Mateo County, was 99.2 percent in December. This is the first time since February of 2012 that it fell below 100 percent, which is as far back as the data collected by Redfin goes.
The sale-to-list ratio is the final sale price divided by the last list price. If it’s above 100 percent, the home sold for more than the list price, and vice versa. The pandemic low was in Jan of 2021 at 101.4 percent and peaked in April of last year at 111.6 percent.
The Oakland metro, which includes Alameda and Contra Costa counties, had a higher sale-to-list percentage of 99.7 in December, after falling below 100 percent in April 2012. The San Jose metro, which includes Santa Clara and San Benito counties, dipped below the metric even earlier, reaching 99.9% in August 2022. The metro had fallen under 100 percent multiple times since 2012, at the beginning and end of 2019, and in February 2012.
The Bay Area fares better than the national average. The nationwide percentage has been below 100 for most of the period from early 2012 to present. The only time it surpassed the mark was during the pandemic from March 2021 to July 2022. It has since fallen to 98.1 percent in December.
The region was the hottest pre-pandemic housing market in the country with the fastest price growth, according to Daryl Fairweather, Redfin’s chief economist. Home buyers took advantage of mortgage rates reaching record lows during the pandemic and it spurred a buying frenzy. However, there were also many buyers that left the bay area because remote work allowed for that flexibility. Mortgage rates now are above 6 percent since September 2022, demand has gone down as many buyers are priced out of the Bay Area market.
The Bay Area has also been on the forefront of the national housing market downturn. Many neighborhoods in San Francisco had the biggest declines since June of last year, which experts said is because the city is so expensive to begin with, and with higher mortgage rates, more and more potential buyers are being priced out.
Fairweather doesn’t believe the percentage will fall much further, and expects the market to rebound because the bay area is still a desirable place to live.
“I think we’re probably close to the bottom, and I expect it to flatten out and maybe recover by summer or maybe next year,” she told the Chronicle. “The Bay Area needs a recalibration of prices and seller expectations.”
She added that sellers will start to lower their prices, and buyers will meet those prices or go slightly higher.
— Pawan Naidu