Authored by Wolf Richter via WolfStreet.com,
In the first 10 months of Housing Bust 2 (now), the median price plunged a lot faster than in the first 10 months of Housing Bust 1 (2007-11)…
There better be a halfway decent spring selling season, which is supposed to already have started in San Francisco and Silicon Valley, because this is getting pretty bad, pretty fast. But it’s hard to imagine just how good the spring selling season can be amid countless reports of layoffs, working from home somewhere else, with big numbers being thrown around about how many people have left Silicon Valley and San Francisco. The City of San Francisco alone lost about 56,000 residents, or about 6.3% of its population, in the period of 2020 through 2022, according to Census data, even as about 12,000 new housing units were completed over the same period.
The median price in the nine-county Bay Area plunged by another 8% in January from December, by 17% year-over-year, and by 35%, or by $540,000, in 10 months from the crazy peak in March 2022, from $1.54 million to $1.00 million, according to the California Association of Realtors.
Sales of single-family houses in the Bay Area plunged by 37% in January compared to January last year. The sales plunge has been in the same year-over-year range for months.
Seasonally, January is generally the worst month of the year for the median price of sales that closed in January, reflecting deals that were negotiated in December. So there are hopes that this is going to turn around during the spring selling season that everyone is praying for.
But where is this prayed-for demand during the spring selling season supposed to come from? People are now worried about their jobs, and buying a still ridiculously overpriced home, as mortgage rates are once again close to 7%, is probably not the number one priority. In addition, there’s the fear of trying to catch a falling knife. The area has lost population. And amid layoffs and hiring freezes, not many people from elsewhere are now being brought in with promises of high salaries.
But the 35% plunge hasn’t done a huge amount of damage yet in the broader sense because the spike in prices leading up to it was so steep and so crazy that not many people actually bought homes at these crazy prices in 2021 and 2022. Most people who bought in 2019 or before – the vast majority of homeowners – are still above water.
In other words, the 35% plunge hasn’t even worked off the entire pandemic-free-money spike. But the illusions of sudden wealth have evaporated as fast as they’d appeared.
As you can see from the jagged line in the charts, median prices are volatile and they’re seasonal, and they can get skewed by the mix of what actually sells, etc. etc. So they need to be handled with care. But this plunge is nevertheless historic.
Blast from the past: Housing Bust 1 v. Housing Bust 2. During Housing Bust 1, which started in the Bay Area in mid-2007, the median price plunged by 59% in 21 months, from May 2007 ($789,250) through February 2009 ($321,110), when it hit bottom.
Ominously, during the first 10 months of Housing Bust 1, the median price plunged by only 23%, compared to 35% in the 10 months so far in Housing Bust 2. This chart is a blast from the past, Housing Bust 1 in all its glory:
The five big counties of the Bay Area.
San Francisco: The median price of single-family houses plunged 33%, or by $675,000, from the breath-takingly idiotic peak in March 2022, falling from $2.06 million to $1.38 million in 10 months. Year-over-year, the median price plunged 15%.
The median price in January was about even with January 2019. The first time that the median price hit $1.38 million was in February 2016. The spring selling season better be good:
Silicon Valley: San Mateo County: The median price of single-family houses plunged by 32% from the peak in April 2022, by $776,000 in nine months, from $2.40 million in April to $1.62 million in December. Year-over-year, the median price plunged by 19%.
This median price was nearly flat with January 2021 and was first seen in February 2018.
Silicon Valley: Santa Clara County (includes San Jose): The median price of single-family houses ticked up in January, but was still down 22%, or by $440,000, from the peak in April 2022, having dropped from $1.97 million to $1.53 million in nine months. Year-over-year, the median price was down 11%.
Alameda County (East Bay, includes Oakland): The median price of single-family houses plunged 31% from the peak in May 2022, or by $479,000, from $1.54 million to $1.06 million. Year-over-year, the median price was down 15%.
Contra Costa County (East Bay): The median price of single-family houses plunged 30% from the peak in April 2022, or by $313,500, from $1.05 million to $736,500. Year-over-year, the median price was down 11%.
Median time on the market in the Bay Area ballooned to 32 days in January before the property sold or was pulled off the market because it didn’t generate a deal. This was up from 28 days in December 2022, and from 12 days in January 2022.
So a good spring selling season – or at least not catastrophic – is now what everyone is praying for. In January, mortgage rates had dropped to near 6% and the stock market had jumped, but that’s already over. The daily measure of the average 30-year fixed mortgage rate is already back over 6.75% according to Mortgage News Daily, amid renewed inflation fears and frustrated Fed-pivot hopes.
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