Bay Area real estate has long been hailed for its sizzling hot prices, one million tear-downs and bidding wars. But a new report from the housing website RealtyHop shows that what goes up does tend to come down eventually.
The study investigated the strength of the 100 largest housing markets across the United States. Researchers analyzed over 300,000 real estate listings on RealtyHop to identify the market health of each city based on the median change in asking prices. And it may surprise you to learn that four Bay Area cities got ranked among the weakest real estate markets in the nation.
San Francisco was ranked No. 97 out of 100, the fourth coldest housing market in the country in December. The average listing required a drop of -5.63% in order to be taken off of the market. Despite this, the city by the bay continues to be the most expensive housing market in the United States.
"The Bay Area housing market seems to be going through a correction period," says analyst Shane Lee. "It is no news that the Bay Area is one of the most expensive housing markets in the nation with a median home price of $1.4 million in San Francisco, $725,000 in Oakland, and $849,000 in San Jose. In fact, the Bay Area housing market is one of the least affordable markets in the U.S. A homebuyer making median income would have to spend over 60% of income on the home. The truth is, not everyone makes over $150k each year, and at some point, the home prices would reach a ceiling, which seems to be what the Bay Area is experiencing."
Next up near the bottom of the barrel was Oakland, which ranked No. 95. The East Bay city saw a median price slump of -4.98%. Both San Francisco and Oakland made the bottom 10 of the rankings.
Fremont, for its part, ranked No. 88, with a median price slide of -3.93%. The capital of Silicon Valley fared slightly better. San Jose ranked No. 84 out of 100 cities included in the report, in terms of having a strong housing market. San Jose saw a -3.7% change in the asking price in December.
Some experts say this cooling of the market is all part of a normal stabilization period that will keep the housing bubble from suffering a big burst down the line.
"As the housing market cools down, sellers have to lower the prices in order to attract buyers and close the deal," notes Lee. "In San Francisco, listings saw a median price drop of -5.63%, which translates to around $100k. That is not to say, however, that the Bay Area market is entering a housing recession, the supply and demand are still strong. It is a good thing that we are seeing a small market correction now as opposed to a big dip over 15%, a nightmare no one wants to live through again."
For those keeping track, the hottest market in the country is Gilbert, Ariz., according to this report, and the coldest market is Detroit. In the Motor City, the median price plunge is -8.33%.
