From Golden Gate Sotheby's Bay Area Market Report…
The San Francisco Bay Area real estate market is strengthening
The San Francisco Bay Area housing market boomed in the second quarter, with prices nearing record levels. A relatively strong economy continued to support demand for housing even as prices rose. The local economy added approximately 18,000 jobs year to date through mid-2024. Most of these new jobs occurred in the outer counties of the San Francisco Bay Area, particularly Solano and Sonoma Counties. The unemployment rate remained in the low 4% range, supporting wage growth throughout the San Francisco Bay Area.
The influx of international immigrants to the San Francisco Bay Area has led some of the households that left the area in recent years to relocate, and employers have also become increasingly committed to return-to-the-office policies, both of which have boosted housing demand.
Sales sluggish due to lack of inventory
Home inventory continues to constrain sales activity as potential buyers continue to face limited options in prime locations. While listings declined slightly in June, typically a stable period, there were still 6,400 active listings at the end of the second quarter. This is 10% below the recent peak in mid-2022 but still significantly higher than last year. The fastest increase in active listings was in the East Bay counties, where inventory in San Francisco fell by more than 10% – the only county where this is true. Highlighting the resilience of local housing demand, sales volume surged in the second quarter and would have increased further had there been sufficient inventory.
All Bay Area counties saw sales increases this quarter compared to last quarter, led by Marin County. Areas near major employment centers in San Francisco, San Mateo and Santa Clara counties saw the largest increases in home purchases. Conversely, Solano County saw a decrease in sales.
Higher price ranges lead the way
Sales increased across all price ranges in the second quarter, with the highest increases at the higher end of the price range. Home sales over $2.5 million doubled from the previous quarter to nearly 2,000, the second-highest quarterly total on record. The increase was driven by San Mateo and Santa Clara counties, but was also boosted by a 170% increase in home sales over $2.5 million in Contra Costa County.
Compared to a year ago, sales over $2.5 million increased 37%. Meanwhile, across the San Francisco Bay Area, sales of homes under $1.25 million decreased compared to last year. Contra Costa and Sonoma counties, where the majority of these sales occurred, saw a year-over-year increase in the number of sales under $1.25 million.
Most homes sell for above the asking price
Additionally, highlighting the strength of demand and price levels across the region, as well as the scarcity of available housing, nearly two-thirds of homes sold for above list price in the second quarter, four percentage points higher than last year and about 10 percentage points higher than the recent historical average.
Future outlook
The San Francisco Bay Area housing market finished the spring homebuying season on a strong note. Housing activity is expected to remain strong through the summer, but prices may decline from all-time highs as seasonal patterns take hold over the coming months. Overall, strong price growth and a rebound in buyer demand in the first half of the year have put the market on a solid footing for the second half of the year. Lack of pent-up demand and a strong economy in the San Francisco Bay Area should spur household formation and homebuying activity. Recent macroeconomic trends suggest the possibility of interest rate easing later this year, and lower mortgage rates could encourage more buyers to enter the market.
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