In many ways, the real estate market in summer 2024 looks the same as it did last year: interest rates are still around 6.5%, inventory remains low, and prices continue to rise.
And yet this year’s summer market saw a surge in activity: Sales in July rose 19.2% compared to the same period last year, according to recently released data from the California Association of Realtors.
So why did sales remain strong this July, while they had already started to decline in the same month last year?
It all depends on how buyers view their interest rate. While interest rates are now at the same level as last summer, they are trending down rather than up. While last year a 6.5% rate terrified buyers, 6.5% now is a relief for buyers who have been used to rates around 7% for the past few months.
“People were tired of waiting for moderate rates,” Jeff LaMont, a longtime real estate agent on the Peninsula, said of the low rates that characterized the pandemic era. “We’re not going back to 2.75% mortgage rates. That ship has sailed, and I think people have realized that.”
As both buyers and sellers pulled out of the market, several Bay Area counties saw a sharp increase in sales volume—Alameda County saw sales increase 24.9%, Santa Clara County saw sales increase 30.5%, and San Francisco saw sales increase 34.8%.
Inventory has remained low, and prices continue to rise amid high demand. The median home price in the nine-county Bay Area rose 3.6% last year, from $1.26 million to $1.3 million. In Alameda County, it was $1.28 million, Contra Costa County $916,500, San Mateo County $2.1 million and Santa Clara County $1.88 million. San Francisco County saw the biggest increase, jumping nearly 10% to $1.6 million.
Even though prices are up from last year, realtors say wealthy techies continue to spend big, which will lead to fierce competition for the few single-family homes available this summer.
Carlos Pompa, a Keller Williams agent, said at an open house this week in San Jose’s lush Willow Glen neighborhood that he had seen “strong influx.” Many of his buyers had competed against multiple offers, and he expected this time to be no different. The three-bedroom home, listed for $1.99 million, would likely sell for around $2.2 million, he predicted.
“There are so many buyers in the market who are paying cash,” Pompa said. “For those types of buyers, interest doesn’t matter.”
But for buyers who rely on financing, even a few percentage points difference in the interest rate can result in significant savings on the monthly mortgage. The monthly payment for a 30-year mortgage on an average-priced Bay Area home with 20% down would be $7,073 at a rate of 7.22% – the high in May – versus $6,546 at a rate of 6.46%, the current average.
Despite the high prices, homes in the Bay Area are snapping up quickly. The average time on the market in July was just 17 days in the nine-county region and was even shorter in most core counties – 13 days in Alameda and Contra Costa counties, 12 days in San Mateo County and nine days in Santa Clara County. In San Francisco, however, homes were on the market for 27 days.
With increased summer activity and rapid real estate transactions, buyers need to react quickly.
This summer, Rachael Rognerud and her husband, a safety engineer, decided to leave their home in San Francisco where they had lived for ten years and buy a single-family home in the East Bay where they can raise their one-year-old daughter.
Rognerud spent weeks searching Redfin and Zillow – but when they found a house they liked, everything fell into place in less than two days. Within hours of a new listing popping up on a three-bedroom, two-bathroom home, Rognerud called her agent to schedule a showing for the afternoon. Forty-eight hours later, the agent called: An offer had already come in. Rognerud and her husband scrambled to come up with a competing offer of $1.6 million within an hour – and ultimately beat out the other buyers.
“We had to be extremely careful in finding a home,” she said.
Although interest rates were just under 7% at the time of purchase, they concluded that it was better to act sooner rather than later.
“As soon as interest rates come down – and we are pretty sure that will happen – property prices will simply rise,” Rognerud said.
It remains to be seen whether the new rules on agent commissions – buyers can no longer assume that sellers will cover agent fees – will have an impact on the market. The changes only came into effect last week and are not reflected in the July data.
“We’ve been predicting a busy fall,” said David Stark, spokesman for the Bay East Association of Realtors. “So we’ll find out exactly what these changes mean sooner rather than later.”
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