The following analysis of the real estate market in Northern California is provided by Matthew Gardner, chief economist at Windermere Real Estate. We hope this information can help you make more informed real estate decisions. For more information about the housing market in your area, please contact your Windermere real estate agent.
Regional economic overview
Job recovery in Northern California appears to have stalled, likely due to 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 lost during the peak of the pandemic have now been restored. Even with slower employment growth, the unemployment rate in the region stood at 5.9% in August (the most recent data available). This is lower than in June and July, but still higher than the May level of 5.5%. By county, the lowest unemployment rate was in Santa Clara County (4.8%) and the highest rate in Solano County, where 7.3% of the workforce remains unemployed. There is usually a delay between the decrease in the number of COVID-19 infections and the possible increase in employment. Given that new cases started to decline in late August — coupled with the increased unemployment benefits coming to an end — I’m optimistic that job recovery will pick up as we head into the winter months.
Northern California Home Sales
❱ In the third quarter of 2021, 16,579 homes were sold, a modest increase of 1.6% year-on-year, but a decrease of 0.2% compared to the second quarter of 2021. I am not surprised that sales are only growing negligibly Compared to last year pandemic-induced increase in demand, but I’m a little concerned that they didn’t increase between Q2 and Q3.
❱ Year-on-year sales increased in Santa Clara and Alameda counties, but declined in the rest of the region. Compared to the second quarter, sales increased in Placer and Solano counties, but were lower everywhere.
❱ Listing activity increased by more than 5.1% from the second quarter of this year, making the drop in sales all the more surprising.
❱ Pending home sales were also modestly lower, suggesting that the market may not see a significant improvement in sales this winter.
Northern California Home Prices
❱ The average home price in Northern California counties in this report rose 20.7% year over year to $1,194 million.
❱ The most affordable provinces in relation to average sales prices remain Shasta and Solano. Santa Clara maintained its position as the most expensive market.
❱ Average prices in all provinces rose by double digits from a year ago, but fell in the provinces of Alameda, Contra Costa, Placer and San Luis Obispo compared to the second quarter of this year.
❱ In terms of price growth, the regional housing market continues to cool and higher inventory levels will exacerbate this slowdown. Affordability is also a major constraint when it comes to rising prices.
Days at the market
❱ The average home sale time in the counties of Northern California in this report decreased by 16 days compared to the third quarter of 2020.
❱ The amount of time it took to sell a home decreased in each county compared to last year. Market time was also lower in all provinces except 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 in the previous quarter.
❱ The biggest market time drop occurred in San Luis Obispo County, where it took 29 days less to sell a home than it did in Q3 2020.
This speedometer displays the state of the real estate market in the region using housing stock, price increases, home sales, interest rates and larger economic factors.
Inventories are rising, sales are declining and prices are retreating. All of these factors, combined with low mortgage rates, should give home buyers an advantage, but it’s a bit premature to suggest that the market is shifting in their favor. If the COVID numbers continue to fall, it will be interesting to see if more buyers resume their search for a new home. Given the above factors, I moved the needle a little more to 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 at both the local and national levels. Matthew has over 30 years of professional experience in both the US and UK
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees of the Washington Center for Real Estate Research at the University of Washington; and serves on the Advisory Board at the Runstad Center for Real Estate Studies at the University of Washington, where he also teaches real estate economics.