Updated 04/11/2026 This newsletter is updated as the economy and situations change.
Have housing prices dropped by over 30% in the past five years? Bay Area housing sales in 2025 as compared to 2021, in most areas, reflect an average 10% drop in price. However, in that same period of time there’s been over 20% inflation which is another way of saying the dollar dropped 20% in value over the past five years. Anything that sold for $1.00 in 2021 should sell for $1.20 in 2026. So if the same house today sells for $0.90 on the dollar compared to what it sold for five years ago, one could say it dropped 30% in value. That’s scary! I have watched real estate prices for 50 years and although they generally go up there are times they come down too.
On one hand the Bay Area is facing a population decline, and a job market decline, both of which hurt real estate prices, but… this should be offset by the likelihood of interest rates coming down in 2026 and 2027. It’s a balancing act. I don’t foresee any major price movements this year. That said, if you looking to sell a non-income producing property, the sooner the better to avoid the cost of holding the property another year or two or the minor risk of it going down a little more. If you’re looking to buy, 2026 should be a good time because the market is slow so you’ll have time to find a good home and inspect it well and interest rates being up keeps property values down. Most sales are concluding below the asking price and very few happening above.
The recent housing shortage is gradually becoming a thing of the past. With each passing month more people are interested in selling versus buying which is creating an increase of available inventory.
Overall, homes are taking an average of 3 to 6 months to sell depending on the city. This is up from several years ago when they took 2 to 3 weeks to sell.
Things that will affect home prices now are:
Population growth or decline – from 2022 through 2024 the Bay Area population has dropped an average of over 20,000 people per year. It’s not surprising as many Californians are retiring out of state, and some small number are moving out of state to follow their employers that are moving from California. Add to this the fact that most couples now average 1.5 children per household which causes a declining population in itself. More people than housing creates a housing shortage and drives home prices up. But now, the movement towards more housing than people can create a housing abundance and drive home prices down.
I can’t emphasize this enough! People go where the jobs are, where the cost-of-living is lower and where taxes are lower. The upcoming midterm elections will decide if California continues with high taxes and an unfriendly business environment or reverses that trend. California is a beautiful place to live so if we change to a business friendly environment that creates more jobs and cut some wasteful spending to lower taxes a little, I believe people will flock back to California as they have for the last hundred years. This more than anything will affect future housing prices.
Interest rates – Most people buy homes based on the monthly payment, not the actual cash purchase price, so lower interest rates lower the payments, resulting in people being willing to pay more for a home.
The economy/employment – The AI industry is Silicon Valley’s new big industry. Some people think AI will inevitably take jobs away from office workers. Time will tell. The Bay Area also has top-notch universities and hospitals which attract out-of-towners to come here, leave their money and go home. These industries are very stable and profitable for the local economy.
On the flipside, many large firms have pulled out of California taking jobs with them. They include: Tesla, Twitter, Space X, Chevron, Oracle, Charles Schwab, Hewlett-Packard, In-N-Out Burger, Palantir Technologies, AECOM, CBRE Group, Playboy Enterprises, John Paul Mitchell Systems, FICO and even our local Budweiser plant and Valero oil refinery have left or are leaving the state. This on top of a countless number of retailers that have permanently closed their doors due to sales loss from online shopping and inventory loss from shoplifting. Lastly, San Francisco’s tourist industry is significantly down. Maybe it’s the economy and maybe people are discouraged because of the high crime and filth. Even the once bustling Fisherman’s Wharf is practically a ghost town. I have not seen Bay Area unemployment figures recently but I suspect there up and climbing.
Questions & Answers
Q Is now a good time to sell a single-family home?
A I believe yes, especially if you plan on selling in the next year or two anyway. Now in the spring, homes become easier to sell, meaning you’re less likely to need to discount it. If interest rates come down that may help prices go up a little bit. Still I’m concerned about a declining population and industries moving out of California. That said, I see no indication that housing prices will skyrocket in the next year. So, if you plan to sell in the next year it might be prudent to sell now, thus eliminating the risk of the market turning down even if just a little before you sell. To me, a bird in the hand is worth two in the bush.
Something to remember: if prices are high when you sell, your replacement property will be expensive. If prices are low when you sell, your replacement property will be cheap. Knowing this removes a lot of the perceived risk of timing the perfect market to buy or sell.
Q Is this a good time to buy a single-family home?
A Yes, but only if you’re buying a home you plan to keep long-term. If you bought now and saw a minor price drop over the next year or two it would likely be offset by the fact you would be paying down your mortgage instead of your landlord’s mortgage over those same few years and you would experience the joy and pride of home ownership during those years of your life. And that’s all you really have, is years of life. If you think rates will be coming down in a few years, it’s better to refinance when that happens versus waiting for it to happen. I love this saying, “You marry the house but you date the interest rate.” It’s a slang meaning you will be in the house for a very long time but rates go up and down. While rates are up you get a discount on the purchase price and when rates go down, and I believe they will be going down, you then refinance into a lower interest loan. In the long term you win both ways.
Confused? Give me a call. If it’s real estate related, and I’m happy to explain it. 707-332-8301
Q What about property flipping?
A If you are thinking of flipping a home, it’s a risky time to do it.
Q Should I fix my home up before I sell it?
A Generally yes, because most homebuyers today are afraid of projects. Today the typical buyer is a young, well-educated, well-paid professional with little interest or ability to work on a home. They prefer it “Move-in Ready”, but improvements can cost more than they benefit a sale. Cosmetic work is still considered the best investment when selling a home. Beauty always sells.
Q Is now a good time to buy a multi-unit income property?
A Yes! High interest rates affect income property prices more than single-family home prices. Just be sure the real CAP rate as reflected in the seller’s tax schedule E is greater than the current mortgage rates you will pay for that property. OR – Have a rental property professional such as myself oversee the transaction. (Alex Schauffert – 707 332 8301) Remember, multi-unit income producing properties are valued on their profitability or CAP rate (click here to see how it’s calculated). Rents have not gone up significantly in the past year or two and may not for the next year or two. That said, make sure the property is profitable at today’s actual rents, not pro forma rents. Check if the tenant so long term and therefore likely to continue to stay or are they brand-new tenants with no track record to know if they will stay. Some believe we are headed for a slowdown (recession). If this causes homeowners to disproportionally sell their homes they will likely end up as tenants. Bad for them, good for landlords. That is what happened in the 2007 recession. Then, home prices dropped but rents went up. Just remember, a significant population drop, if one happens, will hurt rental values. Then again if industry moves back to California and the population stops declining and goes back to growing, rents will skyrocket and multi-unit properties, bought at today’s discounted prices, can be the investment of the century.
Q Is now a good time to sell a multiunit property?
A No! Prices are down because of higher interest rates. However if you are running at a loss and I recommend selling.
Disclaimer with regards to future predictions: Although this is compiled from my 30+ years’ industry experience, it is my best opinion. Its accuracy can’t be guaranteed and should not be entirely relied upon when making financial decisions. If you are not already in contract with a license California real estate broker, let me oversee what you want to do with regards to real estate investing and I’ll help protect your interest and your money.
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