Home values drop in San Mateo County

As interest rates continue to climb, San Mateo County’s real estate market is slowing, with June marking the third consecutive month of decline in home values and the first in years to see prices not increase from the year prior.

Median selling prices for single-family homes in the county were $2.05 million last month, the same as June last year and a dip from $2.25 million in April, according to real estate database MLSListings.

It’s the effect of more homes being listed as some sellers fear a downturn and less competition from buyers, who are finding they are unable to afford what they could earlier in the year, local real estate agents report.

“Sellers have really had a great run,” Marla Perego, a San Carlos Realtor and president-elect of the San Mateo County Association of Realtors, said. “But now buyers are going to be a little bit more picky on where they choose to live.”

Interest rates for a 30-year fixed rate loan climbed to 5.8% last month, according to Freddie Mac. While they’ve settled back to 5.3% in recent days, it’s still a big jump from when they hovered near 3% just months ago — and one that can spell thousands more on a monthly payment for an average Peninsula home.

“The person who used to look for a $2 million property probably now only qualifies for a $1.75 million home,” South San Francisco Realtor Wilson Leung said.

He reported his average sale prices were down 10% from their peak earlier in the year, and while homes previously consistently sold in less than two weeks, they now take longer. He said while it’s common for inventory to increase in the summer months, recent figures are outside of seasonal norms.

There were 614 homes on the market in the county in June, up from 516 the same month last year — and up from just 183 in December last year when inventory hit record lows, according to MLSListings. Sale prices in June meanwhile represented 109% of asking on average, also a dip from last June when they were 111% of the listed price.

“I think we’re pretty much done with over-asking offers these days, and if they are, it has to be quite the special property,” Perego said. She described a home sold recently in Redwood Shores that went for 90% of list price after receiving just one offer, a contrast to months ago when it might have sparked a bidding war.

But, she said, “the sky is not falling, people are still buying houses.”

In fact, emerging trends are actually indicators of a healthy housing market, in which homes stay listed for more than a month and buyers can actually shop around, she said. She also pointed out interest rates, while expected to continue to climb, are historically average.

Indeed, rates for a 30-year loan only first dropped below 5% in 2009 after descending from the double digits of the 1980s, according to Freddie Mac.

And while the rate hikes could cause home prices to tank in inventory rich areas, like Arizona, where housing construction has boomed, it’s unlikely to do so in San Mateo County where demand still won’t be able to be met, she said.

The county was still the most expensive of any in the state per May’s number, followed closely by Marin, San Francisco and Santa Clara, according to the California Association of Realtors.

“We can’t catch up with the amount of housing that we need in this area,” she said. “We haven’t built enough new housing since 2008.”

She added that market meltdowns like those during the dot-com bust or great recession included people losing good-paying jobs. “We’re not going to go into short sales, because still people are making very good money,” she said. Short sales are when a home is sold for less than what is owed on it.

Leung similarly said the movement was indicative “more of a price correction than a market crash.” But he added, sellers who don’t sell now should expect to wait at least a few years for the market to rebound.

“I think the market gets worse from here,” he said. “How much worse, I don’t know.”