As interest rates climb, home supply remains limited in San Mateo County

“It’s just based on the fact that we don’t have enough housing for the amount of people who want and can afford it,” said Marla Perego, a San Carlos Realtor and president-elect of the San Mateo County Association of Realtors. Perego said affordability and increasing interest rates is limiting sales, particularly for entry-level buyers.

Sales in the county decreased by 23%, down to 218 transactions from February last year to the same month this year while inventory was down 36% to just 324 listings, according to real estate database MLSListings. Meanwhile, interest rates reached nearly 4.7% for a standard 30-year fixed mortgage at the end of last month, up from 3.2% last year, and a significant increase from mid last year when they hovered below 3%, according to Freddie Mac.

“We’re starting to see the beginning of people who are first-time buyers having a harder time with the interest rates, so we’re starting to see a little bit of a slowdown,” Perego said, noting that despite the fact, there was no shortage of wealthy and motivated buyers to keep prices elevated.

“They’re tech workers, both have good incomes, they’re very savvy and they’re out there hunting,” Perego said of typical buyers. “They have plenty of money and they’re willing to spend the money, as you can see by how high the prices are going.”

That competition will likely only worsen into the year as in-person work returns to the region, Perego said. Homes spent just seven days on the market and went for 115% of asking in February — the highest average percent over asking for a single month since at least 2017, according to MLSListing data.

Perego said the stiffest competition is for homes priced $1.5 million to $2 million, particularly near good schools. “They want to own a piece of land in a good safe area, so San Carlos, Burlingame, parts of San Mateo, Menlo Park, Palo Alto, these are areas that are always going to stay high,” she said.

Condominium and townhome prices in the county reached just north of $1 million in February, also on par with last year’s spring peak. Competition in the typically less-competitive sector kicked sale prices to 108% of asking.

Homes sold in the nine-county Bay Area averaged $1.35 million in February, up from $1.2 million a year ago, according to the California Association of Realtors. Median prices in the state meanwhile were $771,270, a 10% year-over-year increase. San Mateo County’s year-over-year gain was 5%.

Nationally, price increases were greater, at 20%. The states with the highest increases compared with the same period last year were Florida at 29.1%, Arizona at 28.6% and Nevada at 25.8%, according to CoreLogic data. CoreLogic predicts national year-over-year increase will slow to 5% by February next year due to rising interest rates and buyers reaching their price ceilings.

“Higher prices and mortgage rates erode buyer affordability and should dampen demand in coming months, leading to the moderation in price growth in our forecast,” Frank Nothaft, chief economist at CoreLogic, said.

Perego shared a similar sentiment, adding that “no matter what market you’re in, the interest rate will drive it down.”

corey@smdailyjournal.com

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