Bay Area Home Prices Fall 5% as Mortgage Rates Soar

The price of single-family homes across the Bay Area has fallen as mortgage rates climb to record highs.

The median price of single-family homes in the region dropped 5.2 percent between June and July to $1.26 million, the San Jose Mercury News reported, citing the California Association of Realtors.

The decline came after steady price gains most of the year as sales picked up during the busier spring and early summer home-buying seasons.

The drop also came as mortgage rates marched toward their peak.

Late last week, Freddie Mac reported the average rate for a typical 30-year fixed mortgage rose to 7.09 percent, the highest since 2002. At the same time, a 30-year fixed “jumbo” home loan averaged 7.65 percent, according to Bankrate.com.

In the Bay Area, a jumbo loan is a mortgage that surpasses $1,089,200.

“People are just not jumping into buying a home right now at these interest rates,” South Bay real estate agent Ramesh Rao told the Mercury News.

Despite slowing inflation, Oscar Wei, an economist with the Realtors association, said rates could reach as high as 7.5 percent in the coming weeks before dropping to 6.5 percent by the end of the year. That will tamp down home prices further.

“For buyers who are interested in buying in the fall and winter, there could be some opportunities because it might not be as competitive,” Wei told the Mercury News. “There may be a little more negotiation power for buyers.”

From June to July, San Francisco home prices had the steepest decline, while Silicon Valley fell the least.

Median home prices fell 8.5 percent in San Francisco to $1.46 million, 3.4 percent in Alameda County to $1.26 million, 3.2 percent in Contra Costa County to $900,000, 2.7 percent in San Mateo County to $1.98 million and 1.4 percent in Santa Clara County to $1.8 million.

For more than a year, would-be buyers have seen fewer listings, with homeowners unwilling to give up lower rates. Sellers putting homes up for sale do so reluctantly. In May, the number of Greater Bay Area homes on the market over the prior year hit a 20-year low.

In July, it would have taken under two months to sell all the remaining houses on the market, down from nearly three months at the start of the year, according to the Realtors association. A balanced housing market has at least a four-month supply.