The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Total employment levels in the counties covered by this report fell year over year, with losses in all eight counties.

The regional unemployment rate rose to 4.3%, which was up from 3.3% in the third quarter of 2022, and is now at the highest level since January of 2022. By county, the lowest jobless rate was in Napa (3.6%) while the highest rate was in Shasta, where 5.1% of the labor force was looking for a job.

Northern California Home Sales

❱ In the third quarter of 2023, 9,284 homes sold, which was a 20% drop from the third quarter of 2022. Sales were 8.4% lower than in the second quarter of this year.

❱ Year over year, sales fell across the board. Only San Luis Obispo was able to grow sales from the previous quarter, but the increase was a very modest .9%.

❱ Quarter over quarter, listing inventory was up 16.2%. The average number of homes for sale was down 37.2% from the third quarter of 2022.

❱ Pending home sales were down 9.8% from the second quarter, suggesting that the market is likely going to continue cooling as we move through the balance of 2023.

Northern California Home Prices

❱ Higher financing costs are impacting home sale prices, which dropped 1.2% from the second quarter of 2023 but were 3.9% higher than during the same period of 2022. The average sale price was $1.217 million.

❱ Median list prices in the region fell 3.8% from the second quarter, with double-digit declines in Placer and Napa counties. All counties except Santa Clara (which was flat) saw list prices fall quarter over quarter.

❱ Year over year, prices rose in all counties except Napa and Shasta. Relative to the second quarter, prices were higher in all market areas other than Contra Costa and San Luis Obispo counties.

❱ I believe that the worst of the price drops are behind us, but high mortgage rates are now having an impact.

Mortgage Rates

Mortgage rates continued trending higher in the third quarter of 2023 and are now at levels we have not seen since the fall of 2000. Mortgage rates are tied to the interest rate (yield) on 10-year treasuries, and they move in the opposite direction of the economy. Unfortunately for mortgage rates, the economy remains relatively buoyant, and though inflation is down significantly from its high, it is still elevated. These major factors and many minor ones are pushing Treasury yields higher, which is pushing mortgage rates up. Given the current position of the Federal Reserve, which intends to keep rates “higher for longer,” it is unlikely that home buyers will get much reprieve when it comes to borrowing costs any time soon.

With such a persistently positive economy, I have had to revise my forecast yet again. I now believe rates will hold at current levels before starting to trend down in the spring of next year.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report fell by one day compared to the third quarter of 2022.

❱ Year over year, the length of time it took to sell a home fell in five counties, but rose in Napa, Shasta, and San Luis Obispo counties. Compared to the second quarter of 2023, market time fell in Solano, Placer, and San Luis Obispo counties; was static in Alameda and Napa counties; and rose in Santa Clara and Shasta counties.

❱ In the third quarter, it took an average of 36 days to sell a home, which matched the rate in the second quarter of the year.

❱ Both year over year and quarter over quarter, homes sold the fastest in Santa Clara County and slowest in Shasta County.

The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Total employment in the counties covered by this report was flat year over year. Job gains in Placer, San Luis Obispo, and Santa Clara counties were offset by job losses in the rest of the region. That said, the regional unemployment rate was a reasonable 3.5%. The lowest jobless rate was in San Luis Obispo County (3%), and the highest rate was in Shasta County (4.9%).

Northern California Home Sales

❱ In the second quarter of 2023, 9,999 homes sold, which was a significant decrease from the more than 14,500 homes that sold in the second quarter of 2022. However, sales were up almost 50% compared to the first quarter of this year.

❱ Year over year, sales fell across the board, but there was significant growth in all market areas compared to the first quarter of 2023.

❱ Listing inventory was up 15.2% from the first quarter, which likely contributed to better sales volume despite higher mortgage rates.

❱ Pending home sales were up 33.1% from the first quarter of 2023, which suggests that the growth in sales may continue into the summer.

Northern California Home Prices

❱ Higher mortgage rates continue to impact home prices. The average price of a home sold in the region dropped 7.1% from the second quarter of 2022, but sale prices were up 16.1% compared to the first quarter of this year.

❱ Median list prices in the region rose 5.6% compared to the previous quarter. However, all markets were not equal: median asking prices dropped in Santa Clara, Placer, Shasta, and San Luis Obispo counties.

❱ Prices fell across the board from the second quarter of 2022, with double-digit drops in Napa and Alameda counties. Compared to the first quarter of 2023, sale prices were higher in all market areas, with double-digit growth in Alameda, Contra Costa, Napa, and Santa Clara counties.

❱ I predicted in the first quarter Gardner Report that the worst of the price drops were behind us, and the data suggests that this is true. Stability is returning, even in the face of higher mortgage rates.

Mortgage Rates

Although they were less erratic than the first quarter, mortgage rates unfortunately trended higher and ended the quarter above 7%. This was due to the short debt ceiling impasse, as well as several economic datasets that suggested the U.S. economy was not slowing at the speed required by the Federal Reserve.

While the June employment report showed fewer jobs created than earlier in the year, as well as downward revisions to prior gains, inflation has not sufficiently slowed. Until it does, rates cannot start to trend consistently lower. With the economy not slowing as fast as expected, I have adjusted my forecast: Rates will hold at current levels in third quarter and then start to trend lower through the fall. Although there are sure to be occasional spikes, my model now shows the 30-year fixed rate breaking below 6% next spring.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report rose ten days compared to the second quarter of 2022.

❱ The length of time it took to sell a home rose across the region compared to the second quarter of 2022. However, market time fell across the board compared to the first quarter of this year.

❱ In the second quarter, it took an average of 36 days to sell a home, which was 15 fewer days than in the first quarter of the year.

❱ Homes sold the fastest in Santa Clara County and slowest in Shasta County. Compared to the first quarter of 2023, the greatest drop in market time was in Solano County (-27 days) and Placer County (-17 days).

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Total employment in the counties covered by this report continues to slow, as demonstrated by the addition of only 45,300 jobs over the past 12 months. Although the numbers are adjusted for seasonality every January, this is highly unlikely to be totally responsible for the poor pace of growth of only 1.5%. On a more positive note, the regional unemployment rate fell from 3.8% to 3.6% from the same period in 2022. The lowest jobless rate was in Santa Clara County (3.1%) and the highest rate was in Shasta County at 5.8%.

Northern California Home Sales

❱ In the first quarter of the year, 5,106 homes sold, a significant drop from the more than 8,100 homes that sold in the first quarter of 2022. Closed sales were 21.6% lower than in the final quarter of 2022.

❱ Year over year, sales fell across the board. The largest drop was in Santa Clara County, but the decline in sales activity was pronounced across the region.

❱ Listing inventory in the first quarter was down 32.4% from the prior quarter, which certainly contributed to the poor sales numbers.

❱ Pending home sales were up 9% compared to the fourth quarter of 2022, so it is possible that closed sales may pick up in the second quarter.

Northern California Home Prices

❱ Higher financing costs continue to impact prices, with the average price of a home sold in the region dropping 12.7% from the first quarter of 2022. Sale prices were 5.8% lower than in the final quarter of last year.

❱ Median list prices in the region managed to rise just a little (+1.9%) compared to the previous quarter. Across the counties contained in this report, prices rose in Placer, Napa, San Luis Obispo, and Contra Costa counties but fell in the rest of the markets.

❱ Prices fell across the board compared to the first quarter of 2022, with double-digit drops in Santa Clara, Alameda, and Contra Costa counties. Compared to the fourth quarter of 2022, prices were higher in Placer County, but fell in the rest of the market areas.

❱ The numbers may look dire, but I believe that the worst of the price drops is behind us. While home prices likely have a little further to fall, I still predict that stability will return as we move into this summer.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report rose 17 days compared to the first quarter of 2022.

❱ Compared to the first quarter of 2022, the length of time it took to sell a home rose across the region. Compared to the fourth quarter of 2022, market time rose across all counties except Alameda County, where it remained static, and Santa Clara County, where it fell by three days.

❱ It took an average of 49 days to sell a home in the first quarter of 2023, which was 6 more days than in the fourth quarter of last year.

❱ Even faced with fewer homes on the market, buyers are being wary. I expect they will continue to feel this way until either they believe that a floor in prices has been found, or mortgage rates drop to a point where it becomes compelling to make a buying decision again.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Total employment in the Northern California counties covered by this report rose 64,800 over the past 12 months. Though this was a significant slowdown from earlier in the year, it’s not surprising given the expectation of a possible national economic slowdown in 2023 and its impact on hiring decisions. The regional unemployment rate fell from 3.9% to 3% between November 2021 and November 2022. The lowest jobless rate was in Santa Clara County at 2.4% and the highest rate was in Shasta County at 4.3%. I expect the region to continue adding jobs in 2023, but I believe the pace of growth will slow.

Northern California Home Sales

❱ In the final quarter of 2022, 8,388 homes sold, a significant drop from the more than 14,000 homes that sold in the fourth quarter of 2021. Sales were 26.8% lower than in the third quarter of 2022.

❱ Year over year, sales fell across the board. The largest drop was in Santa Clara County but the decline in sales was pronounced across the region.

❱ Listing inventory was down more than 31% from the third quarter of 2022, but increased over 46% compared to the fourth quarter of 2021. Potential buyers have more choice in the market than they have seen in several years.

❱ Pending home sales fell 35% from the third quarter, suggesting that the market continues to soften.

Northern California Home Prices

❱ Higher financing costs continue to impact sale prices. The average price of a home sold in the region dropped 5% from the same period in 2021. Sale prices were 6.6% lower than in the third quarter of 2022.

❱ Median listing prices in the region fell in all markets other than Contra Costa and San Luis Obispo counties compared to the third quarter. The market with the biggest drop was Napa County, where the median list price fell 4.2%.

❱ Year over year, prices increased in Napa and San Luis Obispo counties but fell in the balance of the region. Only San Luis Obispo County saw prices increase compared to the third quarter of 2022.

❱ With falling prices and growing inventory across most of the region, the market is clearly starting to reflect the higher mortgage rate environment.

Mortgage Rates

Rates rose dramatically in 2022, but I believe that they have now peaked. Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, as I expect it will, rates will continue to drop.

My current forecast is that mortgage rates will trend lower as we move through the year. While this may be good news for home buyers, rates will still be higher than they have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report rose 12 days compared to the final quarter of 2021.

❱ Year over year, the length of time it took to sell a home was static in Napa County but rose across the rest of the region. Compared to the third quarter of 2022, market time rose across all counties except Placer County, where it fell 13 days.

❱ It took an average of 44 days to sell a home during the fourth quarter, which was 9 more days than in the third quarter of 2022.

❱ As we’ve seen over the past several months, the increase in homes for sale is allowing buyers to be more selective. Moreover, there are likely buyers waiting until the spring in the hopes that prices and mortgage rates may be more favorable.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Over the past year, the Northern California markets covered by this report added 159,000 jobs. Given these solid job gains, it was no surprise that the unemployment rate fell from 5.6% to 2.9%. By county, the lowest jobless rate was in Santa Clara County (2.3%) and the highest rate was in Shasta County at 4.3%. The labor force continues to expand, which is a positive signal of the relative strength of the economy in Northern California. The region is only 17,000 jobs short of its pre-pandemic peak employment.

Northern California Home Sales

❱ In the third quarter of this year, 11,454 homes sold, which is down 32.5% from a year ago and down 19.5% from the second quarter.

❱ Year over year, sales fell across the board. Though the largest drop was in Santa Clara County, there were significant declines throughout the region.

❱ The number of homes for sale continues to grow, with total average listings in the quarter up 29.2% from a year ago. There were 25.5% more homes for sale than in the second quarter.

❱ Pending home sales fell 16.6% from the second quarter, suggesting that the market softened during the late summer months.

Northern California Home Prices

❱ The significant increase in mortgage rates has started to impact home prices. The average home sale price dropped .5% from a year ago and 12.6% from the second quarter of 2022.

❱ Median listing prices rose 1.6% from the second quarter, but the increase was not widespread. Although asking prices jumped 18.8% in San Luis Obispo County and rose modestly in Napa and Shasta counties, this was offset by lower asking prices in the balance of the markets.

❱ Prices rose in five of the counties contained in this report, while they fell in three. Compared to the second quarter of 2022, prices fell across the board, with double-digit drops in Alameda, Contra Costa, and Napa counties.

❱ Financing costs are negatively impacting home prices, which I anticipate will continue through the balance of the year and into 2023.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report was seven days higher than it was in the third quarter of 2021.

❱ The length of time it took to sell a home fell in Napa County but rose across the rest of the region. Compared to the second quarter of 2022, market time rose across all counties except Placer, where it fell four days.

❱ During the third quarter, it took an average of 35 days to sell a home, which was 9 more days than in the second quarter of this year.

❱ The combination of more choice and very cautious buyers has led market time to increase.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Over the past 12 months, the Northern California markets covered in this report added 184,600 jobs. With decent job growth, the unemployment rate fell to 2.4%, which is a significant drop from the 5.8% rate we saw a year ago. The lowest jobless rate was in Santa Clara County (1.8%), and the highest rate was in Solano County, where 3.5% of the workforce remains unemployed.

Northern California Home Sales

❱ In the second quarter of 2022, 14,235 homes sold, which is a drop of 21.1% compared to a year ago. Sales rose an impressive 37.6% compared to the first quarter of this year.

❱ Year over year, sales fell across the board. The largest drop was in San Luis Obispo County. Solano and Shasta counties had fairly modest declines.

❱ The number of homes for sale jumped more than 67% compared to the first quarter of the year. This growth in inventory has caused an impressive rise in sales.

❱ Pending home sales ticked up from the first quarter of 2022, suggesting that we may see some growth in closings in the third quarter of this year.

Northern California Home Prices

❱ The average home price in the region rose 10.6% from this time last year to $1.35 million. Compared to the final quarter of 2021, prices rose by 11%.

❱ I have started watching list prices, as they will be a leading indicator of whether the market is starting to feel the impacts of declining affordability due to rising financing costs. In the second quarter, the median list price in the region rose an average of 13%. We did see a small drop in Placer County, but I am not overly concerned as it is a fairly small area that can experience unusual swings in both list and sale prices.

❱ Sale prices rose by double digits in all counties other than Shasta compared to a year ago; they were also higher across the region compared to the first quarter of the year.

❱ Even with rising inventory levels and higher financing costs, the market appears to still be buoyant. However, the pace of price growth has slowed, which will likely continue as the area starts to move toward a more balanced market.

Mortgage Rates

Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs.

That said, there are some signs that inflation is starting to soften and if this starts to show in upcoming Consumer Price Index numbers then rates will likely find a ceiling. I am hopeful this will be the case at some point in the third quarter, which is reflected in my forecast.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report dropped two days compared to the second quarter of 2021.

❱ The amount of time it took to sell a home fell in Napa, Santa Clara, San Luis Obispo, and Shasta counties, remained static in Alameda and Solano, and rose modestly in Contra Costa and Placer counties. Average market time fell in all counties other than Solano and Shasta compared to the first quarter of 2022.

❱ In the second quarter, it took an average of 26 days to sell a home, which was seven fewer days than in the first quarter of this year.

❱ The greatest drop in market time from a year ago was in Shasta County, where it took seven fewer days to sell a home.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of select counties of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Northern California added 60,900 jobs in the first quarter of 2022, and 213,300 jobs have returned over the past year. With total employment now at 3.02 million, the markets covered by this report have recovered all but 24,800 of the 473,900 jobs lost during the pandemic. With solid growth in the region, the unemployment rate fell from 3.6% at the end of 2021 to 3.1% in March of this year. By county, the lowest jobless rate was in Santa Clara County (2.5%), and the highest rates were in Solano and Shasta counties, where 4.6% of the workforce remains unemployed. The region’s labor force grew in the quarter but remains below pre-pandemic levels. This is likely to mean that businesses will continue to find it hard to attract new employees, which could slow the pace of growth going forward. That said, I feel confident that all the jobs lost to COVID-19 will have been recovered by the spring.

Northern California Home Sales

❱ In the first quarter of the year, 10,347 homes sold, which is a drop of 12.4% compared to a year ago. Sales were 27.2% lower than in the fourth quarter of 2021.

❱ Year over year, sales fell in all counties contained in this report. Solano County saw a modest drop, but there were fairly significant decreases across the rest of the region.

❱ With listing activity rising 17% compared to the fourth quarter of 2021, the drop in sales was a little surprising.

❱ Pending home sales ticked up from the final quarter of 2021, suggesting that we may see some growth in sales in the second quarter of this year.

Northern California Home Prices

❱ Even with sales pulling back, the average home price in the region rose an impressive 17.2% year over year to $1.215 million. Compared to the final quarter of 2021, home prices rose 4%.

❱ The most affordable county relative to average prices continued to be Shasta. Santa Clara was again the most expensive market.

❱ Prices rose by double digits in all counties other than Napa compared to a year ago. Prices were also higher everywhere but Napa County compared to the fourth quarter of 2021.

❱ Rising prices continue to impact affordability in the region and the significant jump in mortgage rates in the first quarter will not help matters. Any effects of rising rates on prices were not evident in the first quarter, but the second quarter should be more telling.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The speed of the surge in rates is due to the market having quickly priced in the seven-to-eight rate increase that the Fed is expected to implement this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

Northern California Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report dropped seven days compared to the first quarter of 2021.

❱ The amount of time it took to sell a home dropped in every county other than Solano (+1 day) compared to a year ago. Days on market fell everywhere except Shasta, Placer, and San Luis Obispo compared to the fourth quarter of 2021.

❱ In the first quarter, it took an average of 33 days to sell a home, which matched the fourth quarter of 2021.

❱ The greatest drop in market time from a year ago was in Napa County, where it took 14 fewer days to sell a home.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

The job recovery in Northern California picked up its pace last fall, which was good news given the lackluster job growth last summer. Total employment has now risen to 2.94 million, and the markets covered by this report have recovered all but 106,000 of the 474,900 jobs that were lost during the pandemic. Year over year, total employment rose 125,800, causing the unemployment rate to drop from 6.5% to 4%—a far cry from the pandemic peak of 14%. By county, the lowest jobless rate was in Santa Clara County (3.2%), and the highest was in Solano County, where 5.4% of the workforce remains unemployed. The latest data does not cover the period when the Omicron variant of COVID-19 came to light, so we will not see any of its impacts until the January data becomes available. It is also worth noting that the region’s labor force has not been increasing at the expected pace, which can actually slow the job recovery as businesses have a hard time finding workers. Of note is that there are currently more than 78,000 fewer working-age people in the workforce than before the pandemic started.

northern california Home Sales

❱ In the final quarter of 2021, 14,218 homes sold—a drop of 10.6% compared to a year ago and 14.2% lower than in the third quarter. Seasonality is at least partially responsible for the quarter-over-quarter drop, but it’s also because inventory constraints are limiting sales.

❱ Year-over-year, sales fell in all the counties contained in this report, with a modest drop in Solano County and fairly significant decreases across the rest of the region.

❱ Listing activity fell 32% compared to the same period a year ago, which certainly played a part in the lower sales numbers.

❱ Pending home sales were also lower, suggesting that sales in the first quarter of 2022 may slow further.

northern california Home Prices

❱ The average home price in the counties contained in this report rose 16.2% year over year to $1.168 million. Of note is that prices fell 2.1% from the third quarter but this may simply be due to seasonality.

❱ The most affordable county relative to average sale prices was Shasta. Santa Clara remains the most expensive market.

❱ Average prices in all counties rose double digits compared to a year ago, but fell in all counties other than Alameda, Santa Clara, and San Luis Obispo compared to the third quarter of the year.

❱ Affordability continues to be an issue in all areas, but the pace of price growth has been slowing as mortgage rates rose .3% in the quarter. I anticipate that rates will continue to trend higher as we move through the year, which is also likely to act as somewhat of a headwind to price appreciation.

Days on Market

❱ The average time it took to sell a home dropped five days compared to the final quarter of 2020.

❱ The amount of time it took to sell a home dropped in every county compared to the previous year, but the average days on market rose across the board compared to the third quarter of 2021.

❱ In the fourth quarter, it took an average of 33 days to sell a home, which was 4 more days than it took during the third quarter.

❱ The greatest drop in market time was in San Luis Obispo County, where it took 19 fewer days to sell a home than it did the prior year.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

While the pace of price growth slowed in the fourth quarter, appreciation remains very strong. Those wondering what it will take to cause the market to slow down must consider two factors: supply and financing costs. It’s unlikely that there will be any significant increase in inventory in the coming year, but mortgage rates are on the rise. Even though I do not expect them to breach 4% until 2023, higher rates are likely to take some of the heat out of the market.

I have decided to leave the needle in the same position as in the third quarter. As rising mortgage rates are offset by low housing supply, it remains a seller’s market.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

The job recovery in Northern California appears to have stalled out, which is likely because of rising COVID-19 cases. That said, total employment has grown by 144,100 jobs compared to a year ago, and 292,500 of the jobs that were lost during the height of the pandemic have now been recovered. Even with slower growth in employment, the region’s unemployment rate was 5.9% in August (the most recent data available). This is lower than in June and July, but still up from the May level of 5.5%. By county, the lowest jobless rate was in Santa Clara County (4.8%), and the highest rate was in Solano County, where 7.3% of the workforce remains unemployed. There tends to be a lag between decreases in COVID-19 infection rates and potential increases in employment. Given that new cases started to slow in late August—coupled with the expiration of enhanced unemployment benefits—I am optimistic that job recovery will pick back up as we move into the winter months.

northern california Home Sales

❱ In the third quarter of 2021, 16,579 homes sold, a modest increase of 1.6% year over year, but down .2% from the second quarter of 2021. I’m not surprised to see sales rising only negligibly when compared to last year’s pandemic-induced surge of demand, but I am a little concerned that they didn’t increase between second and third quarter.

❱ Year-over-year, sales rose in Santa Clara and Alameda counties, but pulled back in the rest of the region. Compared to the second quarter, sales rose in Placer and Solano counties but were lower everywhere else.

❱ Listing activity rose more than 5.1% relative to the second quarter of this year, which made the contraction in sales all the more surprising.

❱ Pending home sales were also modestly lower, suggesting that the market may not see significant improvement in sales this winter.

northern california Home Prices

❱ The average home price in the Northern California counties contained in this report rose 20.7% year over year to $1.194 million.

❱ The most affordable counties relative to average sale prices continue to be Shasta and Solano. Santa Clara held its position as the most expensive market.

❱ Average prices in all counties rose by double digits compared to a year ago, but fell in Alameda, Contra Costa, Placer, and San Luis Obispo counties compared to the second quarter of this year.

❱ In terms of price growth, the regional housing market continues to cool and greater inventory levels will add to this slowing. Affordability is also a significant limiter when it comes to rising prices.

Days on Market

❱ The average time it took to sell a home in the Northern California counties in this report dropped 16 days compared to the third quarter of 2020.

❱ The amount of time it took to sell a home dropped in every county compared to last year. Market time was also lower in all counties other than Santa Clara (+1 day) and Shasta (+4 days) compared to the second quarter of this year.

❱ In the third quarter, it took an average of 29 days to sell a home, which was 1 day longer than it took during the prior quarter.

❱ The greatest drop in market time was in San Luis Obispo County, where it took 29 fewer days to sell a home than in the third quarter of 2020.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Inventory levels are rising, sales are slowing, and prices are pulling back. All of these factors, combined with low mortgage rates, should favor home buyers, but it’s a little premature to suggest the market is shifting in their favor. If COVID rates continue to drop, it will be interesting to see if more buyers resume their search for a new home. Given the factors above, I have moved the needle a little more towards buyers. That said, it remains a seller’s market.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The following analysis of the Northern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Regionwide, total employment rose 156,300 from a year ago. Northern California has recovered 258,000 of the jobs that were lost due to COVID-19, but there is still a ways to go. The pace of the job recovery has slowed, with a meager 1,600 jobs added in the second quarter. With the number of jobs recovered essentially stalling, the region’s unemployment rate rose from 6% in March to 6.1% in June. I should note that the current level is significantly lower than the 14% rate in April of last year as the pandemic was taking hold of the nation. The lowest jobless rate was in Santa Clara County (5.1%), and the highest rate was in Solano County, where 7.8% of the workforce remains unemployed. Rising COVID-19 infections appear to be having a significant impact on the job recovery in Northern California. Until we see the rate start to drop, a return to full employment will likely take quite some time.

northern california Home Sales

❱ In the second quarter, 16,607 homes sold, an increase of 79.8% compared to the same period a year ago. Although this sounds like a remarkable number, the pandemic slowed sales significantly a year ago. It was pleasing to see sales were also 52.7% higher than in the first quarter of the year.

❱ Year-over-year, home sales rose by double digits in all counties contained in this report. Sales rose the most in Santa Clara County (+67%) from the first quarter, but there were significant gains across the entire region.

❱ The number of homes for sale rose more than 45% from the first quarter of this year, which is sure to have contributed to the solid rise in sales in the quarter.

❱ Pending home sales were up 27.4% from the first quarter, demonstrating that demand remains solid. I expect to see further growth in the number of sales in the third quarter.

northern california Home Prices

❱ The average home price in the Northern Californian counties contained in this report rose 29.4% year over year to $1.257 million.

❱ The most affordable counties—relative to average sale prices—continue to be Shasta and Solano. The most expensive county was Santa Clara. In addition to Santa Clara, average sale prices were above $1 million in Alameda, Contra Costa, and Napa counties.

❱ Average prices rose in all the counties contained in this report. Even more impressive is that all markets saw prices rise more than 10%.

❱ Although supply levels have improved, price growth continues to rise at very impressive rates. This is likely due to low mortgage rates and increasing demand.

Days on Market

❱ The average time it took to sell a home in the Northern Californian counties covered by this report dropped 15 days compared to the second quarter of 2020.

❱ The amount of time it took to sell a home dropped in every county compared to a year ago. Market time was also lower across the board compared to the first quarter of this year.

❱ In the second quarter, it took an average of 28 days to sell a home, with homes selling fastest in Alameda County and slowest in Shasta County.

❱ The greatest drop in market time was in San Luis Obispo County, where it took 29 fewer days to sell a home than in the second quarter of 2020.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

There is a dichotomy in the region as the housing market continues to flourish despite the stalled economic recovery. Although supply levels are increasing, home prices and market time suggest that demand remains remarkably robust.

As such, I believe that the market still favors home sellers, and I have moved the needle a little more in their favor.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.