These Three California Cities Are Forecast To See A Drop In Home Prices In 2024 – Yahoo Finance

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Meta-Description: Although California real estate remains valuable, some cities in the northern part of the state could see a steep decline in property values in 2024

Historically, California has been considered one of the safest bets in real estate when it comes to appreciation and investor profits. However, a recent study by found several California cities could see property values decline in 2024. Could that be an opening for new buyers? Keep reading to find out where you might be able to find some underpriced gems in the Golden State.

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San-Francisco/Oakland/Berkeley -6.5%

The San Francisco Bay Area has always been a desirable real estate market. This is especially true for well-heeled East Bay suburbs such as Walnut Creek and Danville and San Francisco’s wealthiest enclaves like Pacific Heights. The emergence of San Francisco as a center of the tech boom has pushed property values in the area into overdrive.

Adding spiraling rents, low interest rates and a nearly endless supply of newly minted tech millionaires to a lack of inventory led to average home prices in the San Francisco/Oakland/Berkeley corridor increasing from $816,000 in 2016 to nearly $1.1 million by November. That’s down from an all-time high of nearly $1.2 million in May.

A combination of increasing interest rates, an uptick in crime in the city and the rise of remote work has dented this area’s market strength. The forecast for 2024 is that prices will slide by 6.5%. The price drop combined with interest rates will not be significant enough to make buying in the Bay Area a realistic prospect for most people. The market may be permanently beyond the reach of anyone making less than $500,000 per year.

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Stockton, California -9.5%

Stockton, California is an exurb between the Bay Area and Sacramento. For decades, it was one of the last bastions of affordable housing in Northern California, even as prices in the Bay Area exploded. It was against this backdrop that many buyers fleeing the Bay Area discovered they could get a lot more bang for their buck. As recently as 2015, the average home price in Stockton was around $120,000.

Then the word got out and buyers began flocking to the city, which caused the average price to surge to nearly $400,000 by the third quarter of 2022. The Stockton market has continued to cool, and the current price is just a shade below $380,000. A further decline of 9.5% in 2024 could make Stockton a prime target for Northern California buyers on the hunt for value and affordability.

San Jose/Sunnyvale/Santa Clara -15.3%

The San Jose/Sunnyvale/Santa Clara housing markets have benefitted tremendously from the tech explosion of the last several decades. In addition to being in the middle of Silicon Valley and home to many of America’s best venture capital (VC) funds, companies like Yahoo! Inc., Meta Platforms Inc. and Google parent Alphabet Inc. have a significant presence in this area. As the value of these companies exploded, so did employee salaries and the value of their stock options.

This created a massive boom in home prices that saw San Jose surpass the Bay Area when average home prices tipped the scales at $1.6 million for the third quarter of 2023. It goes without saying that when interest rates hit 7% — or even close to it — even the most well-heeled buyer with a 20% down payment of $300,000 may hit the pause button on financing over $1 million.

As the tech industry cools and VC money gets harder to come by, San Jose/Sunnyvale/Santa Clara will likely see some fallback in prices. For everyday home buyers, a predicted 15% drop won’t be enough to make buying in the area much easier. That’s also potentially bad news for people who bought at the top of the market in late 2023.

Winners and Losers

Every market has winners and losers, and Northern California real estate has been on a nearly two-decade-long winning streak. Numerous investors and homebuyers have made out well during that period. But the law of gravity still applies even during real estate booms, and what goes up must come down.

Whether you are a winner or loser depends largely on when you got into the market. Northern California will remain a strong market even if there is a price correction in some ZIP codes in 2024. If you’re looking to buy the dip, 2024 could be a golden opportunity to get in on one of these markets.

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