'The coldest winter'; Rising interest rates cool off Bay Area real estate market

SAN MATEO --  The pendulum is shifting in what many have described as a 'roller coaster' real estate market. Sellers are no longer in the driver's seat, and buyers have the edge.

But that doesn't mean the market is favorable for buyers right now, said Daryl Fairweather, the Chief Economist for Redfin.

"It's not like buyers are winning here," Fairweather told KPIX. "They're paying a lot more for the privilege of borrowing. By some metrics, you could say that we're in more of a buyer's market than we were earlier this year. Buyers are facing less competition, homes are taking longer to sell, and homes are selling for below their list price."

"So, all of those things are more positive for buyers than they were earlier this year. But when you look at how expensive it is to buy a home, it's hard to feel like buyers are better off now than they were earlier this year."

In San Mateo, Tommy Yang is in the process of selling his home. He's had the house on the market for about a month and has yet to receive a full price offer.

His real estate agent translated for us.

"He believes it is a challenge to sell right now," his agent said. "Compared to a year or two years ago, houses like this could get 10 offers, plus. The average house would sell like a hot cake. Right now, even the good houses, probably just get one or two offers – solid ones."

With the exception of the initial three-month lockdown in 2020, home sales in October were at the lowest level since February of 2008, according to the latest data from the California Association of Realtors.

The median sale price of single-family homes in seven of nine Bay Area counties in October was lower this year than it was last year, according to the data.

"Winter is always a slow time for home sales, but this time, it's like the coldest winter ever in terms of how many homes are being sold. It's just not much activity happening with higher interest rates," Fairweather said. "We actually saw a record share of home listings being cancelled – taken off the market – last month in November."

On an individual level, Yang hopes he gets the right offer. Bigger picture, he'd like to see interest rates go down.

"He hopes that the housing market will recover," his agent said. "He hopes that the interest from the Fed will not go so fast and so high and hopes it will come down at some time."

Redfin forecasts home sales will decline to some of the lowest levels seen since the Great Recession next year as a result of the high interest rates, says Fairweather.