Bay Area home prices climb despite inventory surge

Despite a surge in inventory and price cuts, the median price paid for a Bay Area home in October was $845,000, up 3.7 percent from September and up 9.3 percent from October of last year, research firm CoreLogic said in a report Friday.

The number of homes sold last month totaled 7,158, up almost 20 percent from September but down 6.5 percent from October 2017. CoreLogic’s report includes new and existing homes and condos in all nine Bay Area counties.

The price increase over last year represents somewhat of a slowdown for the Bay Area’s frenetic real estate market. On a year-over-year basis, prices have risen for 79 consecutive months, and had been rising in the double digits for 13 consecutive months until September, when the median price also rose 9.3 percent, CoreLogic said.

But that’s still a healthy increase considering that new listings, active listings and price reductions in September and October were way up on a year-over-year basis throughout the Bay Area, according to data from Patrick Carlisle of the Compass real estate brokerage.

Part of that is seasonal, said D.J. Grubb, president of Grubb Co. Realtors in the East Bay.

“The jet takes off in February, levels off in spring, and we sit at that level through the year. Sellers don’t realize that,” Grubb said. “They think they can get the trajectory in October and November (that they got in the spring). They can’t.”

He added that the surge in price cuts “is not value reduction, that’s overambitious seller reduction.”

That may be, and October is always a big month for price cuts as sellers try to close deals before the market slows down from Thanksgiving until Super Bowl Sunday. But the number and percentage of homes with a price cut in October was the highest for the month of October in the Bay Area since at least 2012.

Karen Yang, a Coldwell Banker agent in Los Altos, said the market “is a little more buyer-friendly” than the CoreLogic numbers would indicate.

One of her clients, Lisa Smith, is about to close on a condo in San Mateo. Smith said she is buying the condo to rent out to her daughter, who is paying “exorbitant rent” in Redwood City. “Real estate is something I keep my fingers on,” Smith said. “In September, what we saw was a lot more inventory and less buyers.”

Smith was hoping to be the only bidder on the two-bedroom, two-bathroom condo — and she was. She offered less than the $950,000 asking price and got it for $922,000. “In July (the seller) she would have had multiple offers. She probably would have gotten slightly over asking price,” Smith said.

Yang said the price Smith is paying is what comparable condos in that complex were selling for in early 2017.

She has another client who purchased a home in Sunnyvale (with a different agent) in March for about $2.35 million. It was the 16th offer they had made, Yang said. The home was intended for multigenerational use, but turned out to be not right for anyone in the family so they put it on the market. After getting only one serious offer they sold it for about $2.1 million in July. “We were worried if they didn’t take that $2.1 million the market was going to slip further. I believe it did,” Yang said.

So why are median prices still going up? Because the median is the point at which half of homes sold for more and half sold for less, it can be skewed by changes in the mix of homes — higher or lower end — that sell each month, Carlisle said.

In San Francisco, luxuryhome sales tend to go up between September and October every year, Carlisle said.

In Silicon Valley, which had been one of the nation’s hottest housing markets this year, high-end homes are still selling briskly. Yang said a newly built home on a quarter acre in Los Altos “that we thought was going to be really shaky” just sold for $4.6 million without ever hitting the market.

But lower-end homes are selling much more slowly. In Santa Clara County, “our inventory is about three times what we had available this week last year,” Yang said. “Our single-family homes are up about double, our condos and town houses are up 400 percent. I think the absolute cost of getting into housing has gone up so dramatically here that first-time home buyers may be getting priced out of the market.”

In the East Bay, however, the opposite seems to be true. “In my market,” Grubb said, “under $2 million is more active.”

Jarod Johnson, a mortgage market manager for Wells Fargo in San Mateo through Santa Cruz counties, said the market for purchase loans “remains strong” although “activity has slowed down a bit.” He said the slowdown is partly seasonal, “but there are also signs that this could be, what we are calling, a pause in the market. I wouldn’t say we are at the point where this is a leading indicator of a recession” in housing.

The agency that oversees Fannie Mae and Freddie Mac announced this week that they can guarantee bigger loans next year, which could help some buyers at the lower end of the Bay Area market. Next year, the limit will rise 6.9 percent to $484,350 in most of the country and to $726,525 in high-cost areas including all Bay Area counties except Solano and Sonoma, where it will be lower.

Conforming loans, those that Fannie and Freddie can guarantee, are not necessarily cheaper than bigger loans, called jumbos. But they are easier to get. Jumbo loans typically require a larger down payment, higher credit score, lower debt-to-income ratio and higher “reserves,” or savings left after closing. Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender