Homebuyers See Relief from Prices, Monthly Payments

(Homes in Haight-Ashbury, San Francisco. Photo courtesy SFTravel.com.)

Redfin, Seattle, said homebuyers in many markets are starting to see relief from home prices and monthly payments.

The report said although the typical U.S. monthly housing payment is coming down from its peak, it’s still much higher than it was a year ago, when mortgage rates were averaging 3.5% and the typical U.S. home sold for $378,000. The average 30-year fixed mortgage rate dropped from 6.9% in October to 6.36% in December, and the median U.S. home-sale price dropped from $400,000 to $388,000.

The drop in housing costs has helped fuel a notable uptick in homebuyer demand following a nearly yearlong slump in the housing market. Pending home sales rose 3% in December from the month before, the first monthly increase in 14 months.

Of the nation’s top metros, San Francisco reported the most dramatic change. The median monthly housing payment for San Francisco homebuyers has dropped 14.8% (-$1,477) since hitting its pandemic-era peak in October. The drop from $9,973 to $8,496 is more than double the nationwide decline of 7% (to $2,500). The typical monthly housing payment fell from October to December in all the metros Redfin analyzed, with the biggest drops in West Coast tech hubs and some of the nation’s most affordable areas.

Next come Pittsburgh, with the typical monthly payment falling 12.4% to $1,267, Seattle (-12.1% to $4,509), Oakland (-11.6% to $5,443), Detroit (-11.3% to $1,050) and San Jose (-10.6% to $8,116).

Redfin reported in San Jose, pending sales were up 21%—more than any other metro Redfin analyzed. “Now that rates are down, a lot of Bay Area house hunters are starting to tour homes and make offers again. We’re in a sweet spot where prices and rates have dropped enough to make a meaningful difference in housing payments but there’s still less competition than there has been for the last few years,” said San Jose Redfin agent Angela Langone. “But competition has started to ramp up as more buyers are back in the market and new listings remain scarce.”

The report said home prices have declined fastest in the Bay Area for several reasons. It’s the most expensive part of the country—the typical San Francisco home sold for $1.3 million in December even after an 11% year-over-year price decline—which means prices had a lot of room to fall. Additionally, the Bay Area isn’t as popular as it once was because the prevalence of remote work means many people don’t need to commute to the office.

Bay Area- and Seattle-based tech workers have also been hit hard by the economic downturn, with a surge of layoffs in the industry and stumbling stock prices. Lower stock prices means less money for down payments, and unemployment or the prospect of it means fewer people are searching for homes. But tech stocks have already begun to tick up in the new year and many laid-off tech workers are finding a new job quickly.