Lowering your price? Hot housing market may be cooling a little

Prices for homes have dropped slightly, homes are remaining for sale longer

Could the South Bay’s super-heated real estate market finally be showing signs of cooling?

More sellers in San Jose have been lowering their prices on real estate website Zillow recently, and rising interest rates have economists looking for a slow-down.

Zillow found that prices in the San Jose region were cut on 9.5 percent of listings in June, up from just 7.2 percent a year ago. Sellers in the San Francisco and Oakland market cut prices at the same rate as last year.

Economists from Zillow and online brokerage Redfin expect the runaway market to slow next year, but that doesn’t mean prices will go down. Bay Area prices likely will continue to climb at a slower rate and remain among the most expensive in the nation.

“Ever slightly, the winds are starting to shift,” Zillow senior economist Aaron Terrazas said.

The historic double-digit gains in Bay Area home values during the last year will likely cool off, especially in Santa Clara County.

“That’s just not sustainable over the long run,” Terrazas said.

Redfin CEO Glenn Kelman told investors last week that homes are staying on the market longer in hot cities such as San Jose, Portland and Seattle. Buyers “have finally had enough, at least for now,” he said, according to a company transcript.

“There are still plenty of markets where home-buyer demand is strong,” Kelman said. “But for the first time in years, we are getting reports from managers of some markets that homebuyer demand is waning, especially in some of Redfin’s largest markets.”

Bay Area housing has been on a record-setting, sixyear run of year- over-year price increases. The median sales price for homes in San Francisco, San Mateo and Santa Clara counties tops $1 million, and Alameda County prices are pushing toward seven-digits. Contra Costa County sale prices hit $650,000 in June.

The income needed to buy in the Bay Area continues to rise. A study by mortgage data website hsh.com found the San Jose metro area the least affordable region in the country. A household would need an annual income of $274,000 to afford amedian-priced home. In the San Francisco metro area, the second least-affordable region, a household would need $214,000 in income to buy a home.

Zillow forecasts home values in the Bay Area to grow next year by 7.5 percent in San Francisco and the East Bay and 11.8 percent in the South Bay.

The recent cuts in San Jose prices have come on luxury- and starter-home listings, Terrazas said. He said the drops could reflect several forces: Sellers and their agents setting prices too high, a rise in interest rates and the start of the return to historic norms.

Still, he said, in Bay Area neighborhoods, “it’s not like we’re seeing bargain-basement prices.”

Local agents have spotted signs of a changing market, although prices and demand remain strong.

Tim Ambrose, an agent with Berkshire Hathaway and president of the Bay East Association of Realtors, said homes are staying on the market longer and are receiving fewer offers, but it continues to be a sellers’ market.

“It’s just a slight shift,” he said. “Nothing major.”

Some homeowners become restless if their house doesn’t sell within two weeks, he said. But Ambrose reminds clients that selling a house just two weeks after planting a “For Sale” sign is historically fast.

“We’ve just gotten so spoiled in this market,” he said.

Gustavo Gonzalez, a San Jose-based agent, said he’s also seen small clues that the market is changing. Some brokers have reported that all-cash offers have declined. Others have said the rise in interest rates, which have climbed from 4 to 4.5 percent this year for a 30year loan, and uncertainty over new federal tax laws and mortgage deductions have led to the slow-down.

The median price for homes sold in Santa Clara County in June was $1.3 million, according to real estate data firm CoreLogic. “That’s a lot of money,” Gonzalez said, “for a lot of people.”