A recovery is under way in the Bay Area, as interest-rate shock finally wears off and stock-market gains fuel high-end home sales.

After being battered by slumping tech stocks and interest-rate hikes, buyers and sellers are back in action. Buyers have made peace with current rates—even with uncertainty around when rate cuts will be—and some are reaping the rewards of the AI boom. Despite tech layoffs last year and recent stock-market gyrations, the job market is stable and consumer confidence in luxury real estate is rising. Here’s a breakdown of how the city’s luxury housing market is recovering.

Pending sales are up

In March, pending home sales in the Bay Area hit the highest level since May 2022, according to a Compass market report. Pending sales last month were up 8.3% compared with the prior year, the report said.

Homes are selling

As interest-rate shock wore off late last year, buyers jumped off the sidelines. As of March, single-family home sales were up 9.9% compared with March 2023. Condo sales were still down 20.2% year over year.

• The Bay Area’s luxury market is heating up – with more homes going into contract than last year, when the market stalled.
• Buyers were sidelined in 2023 with “interest-rate shock.” They’ve moved past that, and closed single-family home sales volume in 2024 is higher than 2023.
• At the top of the market, sales of higher-priced homes are especially strong. The stock market is driving luxury sales.
• There is a very limited supply. One reason is because sellers are locked into low-interest rates.
• With limited supply, buyers are getting into bidding wars. Consumer confidence is back.
• In general, properties are also selling faster than they did last year. Buyers know to strike now or they will miss out.

Luxury sales have surged

Luxury buyers have generally been less susceptible to interest rates and, notwithstanding recent dips, stock market gains have fueled real-estate sales. “The more affluent have so much of their household wealth in the stock market,” said Patrick Carlisle, Compass’ chief market analyst in the San Francisco Bay Area. “When they see the soaring values we have—with the stock markets hitting new highs in March—they feel wealthier than they did six months ago. That jacks up their optimism about the future.” At the top of the luxury market, sales of higher-price homes are especially strong. In Presidio Heights, a circa-1909 mansion renovated by Robert A.M. Stern Architects was listed for $14.95 million in mid-March, according to Zillow. It was marked pending on April 4.

Inventory is still a problem

Like many U.S. metros, lack of supply is one of the biggest factors impacting the Bay Area’s luxury market. As of April 1, listings were flat compared with the prior year. About 27% of listings on April 1 were single-family homes.

Bidding wars are back and prices are starting to climb

Stagnant listings and resurgent demand has led to bidding wars this spring. In March, the percentage of single-family homes that sold above ask rose 6.4 percentage points compared with the prior year. As of March, the three-month rolling median sale price for single-family homes increased 8.19% compared with March 2023. The three-month rolling median sale price for condos rose 3.5% year over year.

Sales are happening quickly

Overall, properties are also selling faster than they did last year, thanks to buyers who are striking now for fear of missing out. In March, the average days on market for condos plunged 20% compared with the prior year period. The average days on market for single-family houses dropped 15.6% year over year.

Source: The Wall Street Journal