Housing prices in the San Jose metro area fell 3.3% from October to November, the biggest decline nationwide
Housing prices in the San Jose metro area fell 3.3% from October to November, the biggest decline nationwide
House values in the San Jose metro area fell faster than in any other major urban region in the country last month, according to a new report.
The typical home in the region encompassing Santa Clara and San Benito counties saw its value drop by 3.3% from October to November, according to the report from Zillow. By contrast, the nationwide the value of middle-of-the-road homes fell 0.2% over that period.
Areas outside the city of San Jose weighed down home values in the region as a whole. In the city itself, the typical home saw its value stay about the same from October to November, according to Zillow’s city-specific data.
Home prices in the region and nationwide have been falling since the summer, thanks to rising interest rates, the company said in its report. The average mortgage rate hit 6.9% in October — a 20-year high. Such rates discouraged sales that closed in November, Zillow said. The rise in rates is hitting hardest some of the areas that were formerly among the hottest housing markets in the country, Zillow spokesman Matt Kreamer said in an email to the Business Journal,
“We’re seeing the markets that are either the most expensive or those that grew the fastest during the pandemic slowing the most right now,” he said.
Zillow’s home value data focuses on homes that are priced in the 35th to 65th percentile for their region. The typical home value in the San Jose region peaked at nearly $1.7 million in April, making it the priciest area in the country. That value has fallen 10.6% since then.
The San Jose region has topped the nation in terms of home value declines both from October to November and from its peak. But other regions are seeing values drop significantly too.
Home values are under pressure in Austin too
Values in the Raleigh, North Carolina area fell 2.5% from October to November, and those in the Phoenix metro region slipped 1.6%. Values in the Austin area have dropped 10.4% from their peak and those in San Francisco dropped 9.5%.
The San Jose metro area was one of just three among the top 50 nationwide where home values were down, or flat, in November compared with the same month last year. Home values in the region were up just 0.7% over that period, topping only Austin, which saw no growth, and San Francisco, which saw values fall 1.1%.
As high mortgage rates make it less affordable for residents to buy homes, buyers are forced to either pay more, shop for less-expensive homes or opt out altogether Kreamer said. On the flip side, with fewer people buying, sellers have to start lowering prices in order to close deals.
While sellers may not want to hear it, the price correction is a good thing, Kreamer said. During the early parts of the Covid-19 pandemic, values were rising rapidly at unsustainable levels, he said. What’s happening now is a kind of balancing out, where prices are going back to where they would have gone if not for the pandemic boom, he said.
The quick jump in prices “was unhealthy for the market,” Kreamer said. He continued: “There’s still a lot of room before home values could fall enough to eat fully into those pandemic gains.”
