What to Expect From Bay Area Real Estate in 2023

With its rich culture, exceptional eateries, charming downtown districts, and breathtaking beauty, the San Francisco Bay Area is California’s most coveted region. The Bay Area’s record-breaking real estate sales in the last two years are a testament to its desirability. Historically low inventory, coupled with sky-high demand, resulted in an unprecedented run on home sales that drove prices to unprecedented heights.

 

After a giddy 2021, the market for existing single-family homes in the Bay Area stabilized. Per the California Association of Realtors, the median sold price for Bay Area homes was $1.25 million as of October 2022. At that time, the unsold inventory index had increased to 2.4 months (up from 1.4 months in October 2021). Alameda most closely mirrors Bay Area trends, whereas Napa is an outlier regarding inventory (5.4 months) and average days on the market (over a month).

 

A mere look around the nation suggests the blistering-hot seller’s market has seen its proverbial mercury drop. Inflation, fear of an economic downturn, and increased interest rates have taken real estate from frenzied to balanced, depending on your perspective.

 

But will 2023 continue to see a cooling down across the Bay Area? And what can people expect if they’re actively planning to join the market? Should you buy or sell a home now or press pause on your real estate plans?

 

While there is no definitive answer to these questions, there are some factors you may want to take into consideration. Indeed, whether you’re planning to buy a home or sell a property, greeting the new year with key predictions in your back pocket will help ensure you make sound decisions. Read on for the Veeravalli Team’s roundup of 2023’s leading projections.

Rising interest rates have dominated the headlines as the Fed continues trying to moderate inflation's effects. As of early December 2022, the interest rate for a 30-year fixed mortgage exceeded 7%. Meanwhile, Bankrate’s chief financial analyst predicts the Fed will keep interest rates high as we move into and through 2023. The implications of high interest rates can be interpreted as positive or negative, depending on your real estate goals.

 

Buyers already stretched to make ends meet amid the increased cost of goods and rent may hold off on purchasing a home out of sheer necessity, especially once they have considered the price of property taxes, home insurance, and utilities, among other monthly bills. Other buyers might plow forward with their plans to purchase a home in the Bay Area regardless of the interest rate. Sellers planning to buy a new residence after selling their present property may be dissuaded from keeping their home on the market, as they will also face higher interest rates when they find a new home.

ABC News reported that home prices in San Francisco dropped more rapidly than in any other city in the U.S. in August of 2022. And yet, the reduction in prices did little to mitigate the fact that San Francisco home prices are still high. Going into 2023, all eyes are on luxury markets like Marin County, San Francisco City, San Mateo, and Santa Clara. As of October 2022, the median sold price for existing single-family homes in each market surpassed $1.6 million.

 

Home prices in Marin County rose even as the nation saw a collective decline, with some experts presaging home prices to plunge in 2023. That discrepancy underscores the fact that luxury real estate markets are hyper-local by virtue of their exclusivity. Working with a realtor who stays apprised of local shifts will be even more essential as we navigate a markedly different real estate scene than the one we saw in 2020, 2021, and the first half of 2022.

 

Lastly, it’s important to note that higher interest rates also impact the tech job and stock markets. It’s common knowledge that the San Francisco Bay Area brims with people, including potential buyers, who work in technology. (Indeed, a slight rise in home prices in 2022 has been attributed to a bump in the stock market that may have compelled tech employees to cash in on their portfolios and purchase a residence.) This could cause even more Bay Area home prices to level out in the coming months.

The cooling down of the real estate market — at least in some parts of the San Francisco Bay Area — might be a boon for buyers in 2023. Why? In the last two years, bidding wars became standard, homes sold above their asking prices, and eager buyers often relinquished contingencies to assume ownership of a residence in a super-competitive market. In 2023, hopeful buyers may have more time to tour properties and deliberate their offers with their realtors before moving forward. Buyers may also be able to request the terms they wish and enjoy more reasonable negotiations with sellers.

 

No matter where you stand on the real estate spectrum, all of this emphasizes the need to work with a real estate agent who thoroughly understands your local market and keeps a close eye on broader economic trends. The Veeravalli Team more than fulfills those requirements. Whether you’re searching for Los Gatos homes for sale or contemplating the idea of listing your Cambrian real estate, they’ll guide you through the new year and provide you with ongoing wisdom and counsel. Schedule a consultation with them today to ensure 2023 is the year you accomplish your real estate aims.

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