If you’re trying to make sense of the Bay Area housing market right now and left scratching your head, you’re not alone. Just weeks ago, we were seeing a surge of activity—multiple offers, quick sales, and rising prices. But in a rapid shift, things have cooled quite a bit. So, what does that mean for you?
In our report this month, we’ll break down what is happening, what key indicators we’re watching (even before the data is more widespread), and—most importantly—what it means for you, if you’re thinking about buying or selling in this new environment. Let’s get into it…
BY THE NUMBERS
Earlier this year, we were among the first to observe—and share with all of you—that the Bay Area housing market was heating up even before the data made headlines. Now, thanks mostly to recent macroeconomic volatility (which we discussed, in part, in last month’s report), the reverse is happening.
While we’ve been feeling this on the ground and talking to our active clients about it even before the data was clear, we now have some metrics to highlight the quick market pullback. Let’s discuss some of the key indicators…
Pending Sales Are Slowing:
After a frenzied spring, the number of new contracts put together in May dipped sharply compared to earlier months. Initial stats suggest pending sales in San Francisco, as an example, are down 12–18% month-over-month. (AKA: April’s momentum didn’t last into May.)
Inventory Is Rising:
We’re seeing a jump in “months of inventory”—aka: the supply of homes currently for sale versus the rate they’re selling. Across much of the Bay Area, months of inventory have ticked up to 2.5–3 months, a significant rise from this spring’s sub-2 months pace**. This is right on the edge of a “neutral market,” which is not something we see here very often. This trend signals weaker buyer demand relative to supply, giving buyers more
options and time.
This was accelerated by sellers who watched the crazy start to the housing market this year and who thought that “now was their time.” Demand has been pent up waiting for the right moment. Unfortunately, by the time they hired an agent and got their homes ready to hit the market, the moment/frenzy had passed… (See…it’s really hard to time the market!) And on the flip side, buyers watched their stock portfolios suddenly drop 20% – and then back up – as the markets reacted to the news about tariffs over the course of the last few months. Some of those buyers have pulled back on their searches, saying, “I want to wait until the markets stabilize.” More sellers, fewer buyers = increased inventory.
**Note: as always, you have to be careful with averages. There are certainly pockets of the Bay where things continue to be a solid seller’s market, whereas parts that are more favorable to buyers. If you’re curious to dive in, we’re always happy to get into the weeds with you!
Price Reductions Are Climbing:
As showings slow and buyers get pickier, more sellers are reducing their listing prices. In May, the number of price cuts increased by 25–30%, as compared to last year at this time—evidence of shifting buyer power.
And, let’s not forget:
There is also some “seasonality” factor at play. Historically, the Bay Area real estate market experiences a slowdown post-Memorial Day, as families focus on summer activities, graduations, and vacations – and, as the weather typically gets cold and foggy (in SF). This seasonal pattern often leads to reduced buyer competition and less inventory. (Although, do note that, while it’s typical to see a seasonal dip as we head into summer, this year’s mini-freeze came earlier and more abruptly than usual.)
Typically, pending sales slow by 10-18% between late May and late June. However, as compared to June 2024, our pending sales are down 15%, which is higher than expected given we’re at the beginning of June.
Also compared to this time last year, we see months of inventory up across the Bay by ~30%. Part of this may be because Memorial Day was one week earlier this year, but overall, it’s part of the bigger picture that we’re seeing.
The good news? Buyers have more options at a time of year that is usually deemed to be pretty “slim pickings.”
Finally, and importantly, price reductions are at their highest level since summer 2022!
Buyers, NOW Might Be Your Time to Shine:
This moment in time may present a unique opportunity for buyers:
- Increased Inventory: More listings mean a wider selection of homes.
- Less Competition: With fewer buyers actively searching, there’s a higher chance of securing a property without entering a bidding war.
- Negotiation Power: Sellers may be more willing to negotiate on price and terms, especially if their property has been on the market longer than anticipated.
- A Window Before the Next Shift: Historically, these cooldowns are temporary. Savvy buyers who act swiftly during these periods often secure the best deals before the next upswing.
Remember that shifts up and down are normal, but real estate is a long term investment! As history clearly tells us, the value of Bay Area real estate over the long term remains a smart investment option.
But, What About Sellers?
If you’re considering selling, the current slowdown might feel a little discouraging—but here’s what you need to know: well-presented, well-priced homes in desirable areas are still selling, and often quickly. In fact, many of the properties that are getting into contract right now have three things in common: they’re move-in ready, priced with today’s buyer in mind, and located in desirable neighborhoods with good walkability, schools, or amenities
In May, across much of the Bay Area, homes that checked these boxes averaged just 14–21 days on market, while those needing work or priced aspirationally sat for longer and saw more frequent price reductions. For example, in Alameda County, nearly 1 in 4 active listings had a price reduction in the last 30 days—reminding us that pricing strategy has never been more important.
The good news? Buyer demand hasn’t disappeared—it’s just more selective. Here are some tips for Today’s Sellers:
- Price with precision. Forget 2021 comps. Look closely at what’s going under contract right now.
- Prep your home to shine. Turn-key sells, especially when buyers feel cautious. Staging, paint, and light (but strategic) updates go a long way.
- Be open to preemptive or off-market offers. With fewer buyers touring homes, the right buyer might strike early—and serious.
Conclusion:
While the market’s rapid pace earlier this year favored sellers, the current slowdown offers a more balanced environment. For buyers, this could be an opportune moment to enter the market, especially before the typical Fall uptick in activity.
If you’re considering buying or selling in the Bay Area, let’s discuss how these market dynamics impact your goals. I’m here to provide tailored insights and strategies to navigate this evolving landscape.
