Highlights from this report:
- Home prices continue to fall in dozens of California cities.
- Prices are dropping most in the South Bay and Silicon Valley regions.
- We expect these drops to continue through 2019 and into 2020.
While home prices nationwide continue to climb, there are plenty of U.S. cities where values are actually dropping right now. And in some cities, they are falling fast.
Today, we’ll be taking a look at some of the California cities where home prices are dropping in 2019 (and could continue to drop into 2020).
California Cities Where Home Prices Are Dropping
Want to know which California cities are experiencing home-price declines in 2019? Here’s the easiest method.
Look at a map of the Golden State. Draw a big, imaginary circle just to the south of San Francisco. Make sure it includes most of the South Bay and East Bay regions, along with all of Santa Clara County. That’s where prices are dropping.
As of fall 2019, home values were falling in places like Cupertino, Mountain View, Palo Alto, San Jose and Sunnyvale.
All of these real estate markets have something in common. They’ve all experienced rapid (and unsustainable) home-price gains over the past few years. In most of these markets, severe inventory shortages have created a kind of frenzy among buyers that causes them to make offers above the asking price. This in turn has caused home values to skyrocket.
But those days seem to be in the past, for the most part. Now the trend has reversed. Instead of skyrocketing, home prices are now plummeting in some of these California cities.
The biggest price drops seem to be occurring in the South Bay / Santa Clara Valley region of the state. In some of those cities — like Cupertino and Milpitas — median home values have dropped by more than 10% over the past year (source: Zillow).
In September 2019, Kathleen Pender from the San Francisco Chronicle wrote: “Four Bay Area counties posted year-over-year price drops in August, the largest being Santa Clara’s 8% decline.”
23 Housing Markets Where Prices Have Fallen
So, which California cities are experiencing a drop in home prices? We’ve mentioned a few of them above. But that’s just the tip of the iceberg.
The list below is based on data provided by Zillow in late September 2019. The percentage beside each city shows how the median home value changed over the previous 12 months. That’s according to the company’s proprietary “Home Value Index.” Bolding indicates cities where home prices have dropped by double digits in the past year.
Year-over-year price drops in California housing markets:
- Berkeley: -3.0%
- Concord: -1.9%
- Cupertino: -11.5%
- Fremont: -3.4%
- Gilroy: -7.9%
- Hayward: -2.4%
- Healdsburg: -6.6%
- Irvine: -1.9%
- Los Altos: -11.6%
- Martinez: -1.7%
- Mendocino: -8.4%
- Milpitas: -10.7%
- Mountain View: -8.9%
- Palo Alto: -12.3%
- Pleasanton: -4.9%
- Redwood City: -5.3%
- San Jose: -9.3%
- Santa Barbara: -3.1%
- Santa Clara: -13.2%
- Santa Rosa: -1.4%
- Saratoga: -11.9%
- Sunnyvale: -14.5%
- Walnut Creek: -1.0%
Statewide, Values Are Still Climbing
To be clear: These are not the only California cities where home prices are dropping in fall 2019. There are others as well. But it does give you a sense of what is happening across the state.
It’s also important to point out that prices are still climbing in most cities across the state. The housing markets above are an exception to that overall trend.
The Santa Clara Valley is currently taking the biggest hit, in terms of home-value declines. In many cities in that region, prices have dropped by double digits over the past year. We expect this downward trend to continue through 2019 and into 2020, though it will likely become less severe over the coming months.
San Francisco appears to be “insulated” from these price drops, to some degree. Due to the city’s unique geography, construction opportunities are limited. Housing demand, meanwhile, remains strong. So it’s possible that San Francisco could weather the storm and hold its home values better than the surrounding cities.
Chico and Eureka Are Outpacing the National Average
The statewide median home price in California continues to climb. That’s because most cities across the state are still seeing a rise in house values. The crash scenarios listed above are mostly limited to the South Bay region, with a few scattered cases in Wine Country, the East Bay and elsewhere.
Looking forward to the north, we can find some examples of California housing markets that are still appreciating at a steady pace. Cities like Chico, Eureka and Redding are experiencing significant home-price gains right now.
In Chico, a Northern California city of around 93,000 residents, home prices have risen sharply over the past year. This month, the team at Zillow wrote: “Chico home values have gone up 13.2% over the past year and Zillow predicts they will rise 7.3% within the next year.”
That particular forecast was made in September 2019, so it extends into the fall of 2020. For comparison, prices nationwide rose by around 5% over the past year. So clearly the Chico real estate market is outperforming most other cities in the country, in terms of price growth.
Eureka, California also experienced a big increase in home values over the past year. The median price in that Northern California city rose by around 8% in the last 12 months (as of September 2019).
Disclaimer: This article includes third-party data that is deemed reliable but not guaranteed. Housing market forecasts are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims or assertions about future real estate trends.