East Bay Market Update - January 2023 | Blog

Calia Homes is pleased to share our initial monthly newsletter providing data and detailed insight into the Berkeley, Oakland and Piedmont housing markets. In addition to a review of the real estate market in the second half of 2022, which showed an overall cooling trend, we also compare sales activity for 2021 and 2022 in all three cities. We hope you find this information helpful.

Kind Regards, Carrie and Jennifer and Calia Homes Team

The charts below show how the median prices of homes in Alameda and Contra Costa Counties declined in Fall 2022, with price decreases of nearly 20% since March in some areas. Concurrently, inventory constricted as prices began to decrease due to prospective sellers either removing their homes from the market or opting not to list.

THE EAST BAY MARKET OVERVIEW

Interest Rate Changes Impact the Market

In Spring 2022, we saw exceptional price appreciation as buyers sought to enter the housing market with historically low interest rates. However, beginning on March 17 the Federal Reserve increased interest rates seven times creating a dramatic change in the interest rate environment; nearly doubling rates for prospective homeowners.

How Did This Impact Buyers?

By way of comparison, a buyer with a 3% interest rate would have paid approximately $2,500 per month on a $1,000,000 loan in February. In December, at a 6% interest rate, that same buyer would pay $5,000 per month in interest on their loan. This simple math helps explain the downward shift in the housing market at the end of 2022.

Moving Through the Winter Months

We expect that our levels of new housing inventory will remain fairly low throughout January and February, which is normal. (Who wants to visit an Open House during a ‘Pineapple Express’?)

As we enter March 2023, we expect to see more inventory coming onto the market and interest rates leveling. Typically, we see most of our annual appreciation during the Spring real estate Market.

Berkeley Single Family Homes Sales 2022 vs 2021

Average Price

2022: $1,843,397 | 2021: $1,771,414

This represents an increase of 4% in the average price from 2021 to 2022.

Total Number of Sales

2022: 567 Sales | 2021: 720 Sales

This represents a 21% decrease in number of home sales in Berkeley year over year.

Days on Market

Days on Market increased from 16 days in 2021 to 17 days in 2022 a 6% increase.

Oakland Single Family Home Sales 2022 vs. 2021

Average Price

2022: $1,261,101 | 2021: $1,220,772

This represents an increase of 3% in the average price from 2021 to 2022.

Average Number of Sales

2022: 2,181 | 2021: 2,940 Sales

This represents a 26% decrease in number of home sales in Oakland year over year.

Days on Market

Days on Market increased from 18 days in 2021 to 20 days in 2022 an 11% increase.

Piedmont Single Family Home Sales 2022 vs. 2022

Average Price

2022: $3,166,568 | 2021: $2,769,155

This represents an increase of 14% in the average price from 2021 to 2022.

Average Number of Sales

2022: 115 Sales | 2021: 148 Sales

This represents a 22% decrease in number of home sales in Piedmont year over year.

Days on Market

Days on Market increased from 10 days in 2021 to 17 days in 2022, a 70% increase.

Buyers acted in their financial interest remarkably well between 2020 and 2022, evidenced by the type of financing buyers used to purchase homes during that period. The average 30-year mortgage rate reached record lows in the third quarter of 2020, dipping below 3% for the first time ever.

The super-low cost to borrow priced more potential buyers into the market because of the massive increase in affordability. For example, if you can afford the monthly payments on a $500,000 loan at 6% (~$3,000/month), then you can afford a $700,000 loan at 3% (~$3,000/month).

Homebuyers, in a sense, could afford more home, so conventional loans rose to the highest level since 2006, and prices rose at the fastest rate in history. Importantly, prices rose quickly, but buyers weren’t getting priced out of the market because of the outsized effect interest rates have on affordability. Financing through conventional loans remained elevated through Q1 2022, which marked a sharp increase in mortgage rates and inflation.

The changing economic environment in Q1 2022 wasn’t lost on cash buyers, either. Inflation was moving higher and depreciating the value of a dollar, which caused all-cash home purchases to jump to the second-highest level on record (just below the all-time high reached in 1988).

Buyers’ money was worth more, so spending in the near term had more value. We recognize that cash purchases are far less common, but those who could pay cash chose wisely. We expect all-cash purchases to stay elevated, as mortgage rates will likely remain in the 5-8% range for the foreseeable future. It should come as no surprise that cash purchasers typically have an edge, and that remains true now. However, the typical buyer who finances part of the cost of the home has more opportunity than expected this year.

The housing market has seasonal trends during which home prices and inventory generally rise in the first half of the year and fall in the second half. We will likely have more homes on the market than expected this winter, in a less competitive market, giving buyers a greater chance of finding the right home. Sellers are often buying in conjunction with selling their homes, so more inventory also benefits them.

The U.S. housing market has certainly shifted throughout the year, and we must recognize the current conditions homebuyers and sellers face. Of course, different regions vary from the broad national trends. Take a look below at the Local Lowdown for in-depth coverage of your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.

We look forward to keeping you updated on inventory, interest rates, and trends in appreciation as we move through 2023.

Please contact us if you are thinking about buying or selling a home. We look forward to being your local real estate resource.

Kind Regards, Carrie and Jennifer

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