Home prices have dropped dramatically across parts of California which had until recently been the most overvalued in the entire country, according to recent data.
The Golden State was affected by the same price correction that hit the United States housing market between late summer 2022 and spring 2023, though prices have slightly rebounded since then, as inventory remains low.
According to the California Association of Realtors (CAR), the median sale price of an existing single-family home in the state was $840,360 in October—down from $843,360 in September but up 5.3 percent compared to a year before.
In the same month, existing home sales rose by a modest 0.3 percent, though the number was 11.9 percent lower than in October 2022 as sales remained hindered by high mortgage rates.
Amidst this situation, some urban areas have seen more dramatic price changes than others. In San Francisco, which for decades has boasted the highest home values in the Bay Area, the price of downtown condos has dropped to levels unseen for the past 10 years, according to a chart updated in November and released by Compass, a website that provides real estate market data and insights.
While in downtown San Francisco a new condo might cost an average of just above the $800,000 mark, in the rest of the city, which has been less affected by the impact of remote work and the recent exodus of major retailers, the price of new condos remains considerably higher at over $1,200,000.
San Francisco is not the only place in the Golden State experiencing drops in property values. Cities like Dublin, Truckee, Palo Alto, Pleasanton, Alameda, Oakland, San Mateo, Berkeley, Albany, San Anselmo, Willits, Mountain View, Fremont, Santa Cruz, Livermore, San Carlos and Castro Valley have all experienced drops in home prices as well, according to a recent report by GOBankingRates.
While in San Francisco, prices were down by 13.04 percent year-on-year, in Palo Alto and Fremont, for example, they had dropped by 12.80 and 10.60 percent, respectively. In Santa Cruz, prices dropped by 10.44 year-on-year, according to the website.
But it's likely that prices will start slowly climbing back up after the Federal Reserve's announcement earlier this week that it will soon shift towards cutting interest rates, as the inflation outlook is looking good.
While no one can predict the future of the California housing market, the state is likely to mirror the national trend of modest growth which several analysts, including Goldman Sachs, are forecasting for next year—especially if inventory remains as low as it is.
