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Bay Area real estate: San Jose home prices to see biggest drop – San Francisco Chronicle

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Opposing predictions on the San Jose real estate market hinge on whether buyers will keep competing for homes in the metro area or look elsewhere for more affordable units. 

Opposing predictions on the San Jose real estate market hinge on whether buyers will keep competing for homes in the metro area or look elsewhere for more affordable units. 

Marcio Jose Sanchez/Associated Press 2018

Home values in the San Jose metropolitan area will drop sharply in 2024, falling faster than in any of the country’s other largest metros.

At least, that’s according to real estate brokerage site Zillow, which estimates the San Jose metro’s average home values will fall from $1.46 million in November 2023 to $1.37 million in November 2024. But real estate agents pointed out that home prices in the area are in an upswing — one they expect to continue next year.


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The opposing predictions hinge on whether buyers will keep competing for homes in the San Jose metro area, which includes Palo Alto and San Benito County. A Zillow economist said buyers will look elsewhere for more affordable homes. But Bay Area real estate agents argued that lower rates will only cause more buyers to haggle for a limited housing inventory.

Typical home values in the San Jose region continued to climb in November, increasing by 5% from their August value of $1.39 million, according to Zillow data. The metro area’s November home value of $1.46 million wasn’t quite as high as its peak of $1.52 million in May 2022, before elevated mortgage rates drove many buyers from the market. But it reflected a faster rise than in the San Francisco and Sacramento metro areas, which saw values increase by roughly 1% from August to November 2023.

Those increases will soon reverse, said Nicole Bachaud, senior economist at Zillow. She explained that in expensive markets such as San Jose’s, mortgage rates are still too high for many prospective homebuyers, slowing down the market and lowering prices.

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“There are no indications rates will fall significantly, and a 6.5% rate is still a very expensive mortgage on million-dollar homes,” Bachaud said in an email.

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But Sandy Jamison, a real estate broker with the San Jose-based Jamison Team, said the area still has plenty of buyers. While some are looking elsewhere for homes, she explained, many want to stay in the region. And declining interest rates could further intensify competition among buyers, driving up prices.

“We’ve always had so much demand in the Bay Area and in San Jose,” Jamison said. “Because there’s so much population, there’s enough buyers to absorb the limited inventory.”

Zillow sometimes adjusts its forecast. The company previously projected home values would rise in the San Jose and San Francisco metro areas — though not as much as in other regions — from summer 2023 to summer 2024.

Now, Zillow estimates San Jose will see a bigger year-over-year drop — 6.1% — in home values than in any of the other 100 largest metro areas for which it has data. The San Francisco metro area is expected to have the third-biggest dip over that period, 4.8%.

Home values will also decline as mortgage rates encourage more homeowners to sell their properties, according to Bachaud, Zillow’s economist. That would increase the supply of housing and reduce prices.

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But Nikki Edwards, a Realtor with EQ1 Real Estate, said she doesn’t expect that to happen anytime soon, because many homeowners are locked into lower rates they don’t want to give up. Once rates drop to around 5%, she added, some might be willing to sell their homes — but she doesn’t believe that will happen until the end of 2024 or early 2025.

Demand for homes in the Silicon Valley remains especially high, Edwards said, as tech workers are increasingly required to return to their offices. And many of those workers, she explained, make enough money to afford the region’s high prices.

“This is an inventory issue, not a demand issue,” Edwards said.

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