Why are San Mateo County home prices still high?

San Mateo County is often listed as one of the most expensive counties in the Bay Area, often surpassing nearby counties in median home price sales. With a higher supply of large homes than San Francisco, and a more central location to technology and life sciences firms than Marin County, the area attracts buyers willing to pay a premium for access to both.  

“We saw a lot of wait-and-see approaches last year and the first part of this year,” said Compass Realtor Raziel Ungar. “I think the people who are transacting now are like, ‘this is where I’m at in my life, and I’d like to make a move,’ and therefore are willing to accept the market conditions.”

Many of those are often buyers at the higher end of the market, who are able to offer a high down payment, or even cash, and don’t have to wait for rates to drop to purchase the real estate they’d like. In fact, the number of sales for homes valued $5 million or higher has increased, despite home sales decreasing overall throughout the Bay Area. 

Those who did want to wait out the steep rates, however, have not had much reprieve, as 30-year fixed rate mortgages reached a 7.57% weekly average as of Oct. 12, the highest reading since 2000. But despite rates nearly half that amount at the beginning of last year, regional home prices don’t show a drop proportional to the interest spike.

“Prices are really not down a ton, considering how much borrowing [costs] have gone up. I would’ve expected prices to drop further,” Ungar said. “Someone choosing to buy now is just choosing to take on a much higher payment than they would have in the past.”

In response to the high rates, many are seeking out more creative financing techniques as well, said Peter Gum, Realtor at Keller Williams Peninsula Estates. 

“Adjustable rates are back in fashion, as are other forms of funding and financing, especially in the area of short-term financing,” he said. 

According to a recent Mortgage Bankers Association report, the share of adjustable rate mortgage applications as of Oct. 11 was up to 9.2%, the highest since November 2022.  

But interest rates are not the only one factor to consider when evaluating regional housing prices, said Gum, noting that San Mateo County’s unique market speaks to a trend over a decade in the making. According to MLS data, the supply, or number of active listings in the county, has dropped by about 80% over the past 13 years, even though demand has continued to rise as a result of new technology, life sciences and biotechnology companies in the area. 

“You can only imagine that with that kind of inventory, there are a lot of buyers that want to be involved in the market,” he said, adding that capital gains exemptions have not kept up with the surge in home values, further dissuading the baby boomer generation from selling their homes. 

“Now, if you sell your house, you’re going to get hit with this huge capital gains tax and people are saying, ‘that’s crazy. I’m not going to sell.’ So what do they do? They either hold it for their kids, or they just remodel … or they take advantage of the strong demand to live here and rent it out,” he said.

Still, sellers have to maintain a competitive edge in the market, as buyers are not clamoring for property in the way they did a couple of years ago, said Ungar. 

“In the past, a buyer may have overlooked something, because there were so many offers,” he said. “A majority of the transactions I’m participating in now, there’s just one offer, whereas a couple of years ago, a majority of the transactions would be competitive with multiple offers.”

alyse@smdailyjournal.com

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