Bay Area home sales fall in September, even as mortgage rates decline

While the Bay Area might have seen a second summer in September, home sales were already cooling down.

Home sales in the nine-county region hit their lowest level since March, declining 9.4% from a month earlier, even as mortgage rates trended down, according to recent data from the California Association of Realtors. The average rate for a 30-year fixed mortgage hit 6.08% the week of Sept. 26 — its lowest level in over a year.

That drop in the average mortgage rates came ahead of a September announcement by the Federal Reserve that it would lower interest rates by a half-point, the first rate cut since the pandemic. Though mortgage market had been anticipating the rate cuts, that may not have mattered to buyers as much as the Federal Reserve’s cut.

“The last few weeks, the market was kind of dead,” said Khrista Jarvis, a Danville-based agent. “Then there was the interest rate drop — and that renewed some activity .”

The impact of the Fed’s rate cut isn’t reflected in this month’s sales data, which measures home sales that closed in September (typically meaning they went under contract a month earlier, in August.)

On an annual basis, home sales in the nine-county Bay Area were up 5.1%. The median existing-home sales price in September reached $1.27 million, down 2.6% from the same time last year. The median price was $2.1 million in San Mateo County, $1.93 million in Santa Clara County, $1.63 million in San Francisco, $1.27 in Alameda County, and $863,750 in Contra Costa County.

Inventory was up from this time last year across the Bay Area, increasing to 2.8 months of supply from 2.3 in the nine-county region. Only in San Mateo and San Francisco counties did inventory drop from September 2023.

As inventory increases, so does the time houses spend on the market. The median time on the market for the Bay Area in September was 20 days, up from 14 days at the same time last year.

Two counties tended to see homes transact even faster — Santa Clara County, with a median of 10 days, and San Mateo, with a median of 12 days. Andrew and Jen Oldham recently listed a property in Menlo park at $998,000 — within a week, it received 12 offers, and sold for $1.6 million.

“Buyers are realizing that home values are only going to go up from here, and figuring they should get into the market now,” Andrew said.

Emily and Vincent Calvanese recently decided to sell their four-bedroom, two-bathroom home in West San Jose, trading out their South Bay lifestyle for retirement close to Vincent’s family in Pennsylvania. They listed their home at $1.9 million, and had nearly 100 different groups look at the home during that weekend’s open house. They ended up receiving multiple offers coming in well over asking within just a few days, and are now on track to close on an offer for over $2 million by Nov. 4.

“It’s almost mind-boggling… the sheer volume of interest,” Emily said.

In highly competitive markets like The Peninsula and the South Bay, buyers are still often removing contingencies to come in with the highest bid.

September is also the first month of home sales data to reflect new rules on commission-setting from the National Association of Realtors that debuted in August. Previously, sellers typically paid out commission to both their agent as well as the buyers’, and listed that commission in the MLS, the database available to real estate agents. Now, though, an MLS listing can’t note whether a seller is offering compensation to a buyer’s agent. If a seller declines, a buyer is on the hook for the cost — a provision that some agents worried would scare off prospective buyers.

Sellers, Andrew Oldham said, remain focused on their “bottom line.” Buyers who ask the seller to compensate their agent at the traditional 2.5% may have to submit a higher offer than buyers who might pay their agent themself, or use a flat-fee service.

“It’s provided transparency to buyers and sellers about how agents are paid, and made sellers focus on their net,” Oldham said.

Even though listings are up slightly from last year, agents say inventory remains at historically low levels. Those who bought during the pandemic are still reluctant to sell and give up their lower interest rates since even just a few percentage points difference in interest rate can translate to hundreds of dollars on their monthly mortgage.

As the election approaches and Thanksgiving after that, inventory is only expected to decline further, said Jordan Mott, a San Jose-based real estate agent. The fact that mortgage rates already began climbing again in the first few weeks of October after reaching their low Sept. 26 won’t help.

“With the holidays coming up soon, you don’t tend to see a lot of people bringing new inventory to the market,” he said. “I would expect that we’ll see a relatively mild or stable end to 2024 but I expect when we hit the beginning of 2025 that we’ll probably see an uptick of prices and buyer activity in the market.”