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Bay Area January Home Sales Slow, Not Because of Financial Volatility but Lack of Supply

February 14, 2018


  • January Bay Area home sales were down by 12 percent on an annual basis, following the lowest inventory levels in three years.
  • Silicon Valley posted the largest sales decline, though decreases in all areas were driven by fewer home sales below $1 million.
  • Sales of homes priced between $1 million and $3 million were stronger than the year before.
  • Homes priced above $3 million slowed again, but not in San Francisco and Marin County.
  • Sonoma and Napa counties saw higher year-over-year activity in January, continuing the post-wildfire pattern.
  • Inventory levels continue to trend down, with overall supply down 20 percent from last January and declines seen across all price ranges.
  • Median home prices continue to climb, with overall appreciation in the Bay Area up 12 percent from last January.
  • Despite financial market volatility, the U.S. economy remains strong, with projected 2018 growth the best in a decade.
  • Further increases in mortgage rates will exacerbate the affordability crisis.

Before examining January housing market activity in the Bay Area, let’s address recent financial market volatility and how it may affect real estate markets. Much of the recent volatility stems from fears of faster-than-anticipated increases in inflation. Faster inflation could prompt higher interest rates than previously expected, which means that borrowing would become more expensive for U.S. companies and consumers. Nevertheless, we anticipate stronger economic growth in 2018. Thus, the solid U.S. jobs report that was released on Friday, Feb. 2, which prompted the financial market volatility, was in line with expectations.

The same day, Janet Yellen, on her last day as the Federal Reserve chair, said in a CBS interview that she believed that the stock market has been high in recent months and was concerned about high asset valuations, particularly in commercial real estate. She went on to say that ‘”If there were to be a decline in asset valuations, it would not damage unduly the core of our financial system.”


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