California’s Bay Area is famous for tech companies, foggy weather and sky-high housing costs. But over the last year, something surprising happened: Home prices in many Bay Area counties stagnated or actually fell, according to a new report from Compass.
The report, released Thursday, shows that Bay Area housing markets were “very hot” in late 2017 and early 2018. However, over the following year — a period that saw a broad dip in the housing market followed by an uptick — median prices in five Bay Area counties actually declined, the report reveals. And the counties that bucked this trend were influenced by outside factors such local tech companies going public.
“Generally speaking, except for those markets most affected by the slew of local high-tech IPOs — San Francisco and the greater Oakland market — most markets saw either no significant year-over-year appreciation or year-over-year declines in median house sales prices,” the report states.
Sonoma County, north of San Francisco and with a population of nearly half a million, saw the most depreciation over the past year, with prices falling 5.1 percent. Santa Clara County, home to Silicon Valley and more than 1.7 million people, followed with prices dropping 4.6 percent.
These numbers obviously don’t mean that the Bay Area is suddenly affordable. Compass’ report points out that even with recent depreciation, prices across much of the Bay Area remain near record highs. In San Francisco proper, the median price remains above $1.6 million — many times the median home price of $300,000 that the U.S. hit in March.
Solano County, which stretches inland nearly to Sacramento, was the cheapest of the Bay Area counties, but even there median prices last month were nearly $450,000, according to the report.
Bay Area price appreciation has also significantly outperformed the broader U.S. market.
However, some homebuyers are seeing a bit of relief.
“High-end home markets in outlying counties […] have softened considerably, and would typically be considered to be in buyer’s market territory — much more supply than demand,” the report states.
So why does all of this matter, especially if you don’t live in the Bay Area yourself?
For starters, the cost of housing in and around San Francisco has infamously skyrocketed in recent years, making the city one of the most expensive in the U.S.
Aside from simply being an interesting case study in what happens when the supply of homes doesn’t keep up with demand, the Bay Area’s soaring prices have also prompted serious investments from a number of tech companies. Google, for example, recently pledged to spend $1 billion on housing in the region. Numerous other firms such as iBuyer Opendoor, rent-to-own startup ZeroDown, venture fund Brick and Mortar and many others all have their headquarters in the Bay Area.
All of this makes the region ground zero for the convergence of the housing and technology sectors, and the companies operating in that space are absolutely exporting their respective visions to other parts of the country.
In any case, the heady days of 2017 and 2018 may not be returning any time soon. In an email Thursday, Compass chief market analyst Patrick Carlisle told Inman that “I have a tendency to think that home prices may have peaked in spring 2018 after a 7-year up-cycle in the markets.”
“There are a lot of spinning economic and political plates in the air in the Bay Area, the nation and the world right now — among other big issues, debt levels of all types have hit new highs, and housing affordability in the Bay Area is an enormous issue — so I find it impossible to predict what will happen next,” Carlisle said. “Still, I can’t foresee the high appreciation rates we generally saw in the Bay Area [in] 2012 through 2018 returning in the near future.”