Good News for Home Buyers. Bad News for Home Owners.

• Real estate prices took another leg down in November across the US
• San Francisco home prices down over $100,000 since the peak in June

November brings more good news if you are looking for a house

Good news for home buyers. The US housing market took another beating in November. Home prices across the 30 US metropolitan statistical areas (MSA) we track are down an average of 1.3% compared to October prices, according to Realtor.com data. In dollar terms, the average home across these 30 MSAs got cheaper by $7,100 in November compared to October. If these price declines continue for a few more months, the potential savings for our hypothetical home buyer could easily be in the tens of thousands of dollars.

On the flip side, if you are a home owner, the news is not so great. The equity you have in your house just took another hit. And if you live in the San Francisco-Oakland-Berkeley are, you just lost $54,500 (on average). Ouch. 

But the San Franciscan home owner has plenty of company. 27 of the 30 MSA regions we tracked saw losses in the month of November. Lower property prices are good news for the home buyer and bad news for home owner. However, it is important to keep in mind that property ownership is a long-term investment. As long as the macro fundamentals are still intact (i.e., rising population, strong employment growth, under-supply of new home construction, etc.), you will do well in the long run. 

Moreover, if you are one of the lucky folks out there who purchased one or two years ago (or even longer), you are still deep in-the-money with your housing investment. So don’t panic over the short-term cycles. 

The San Francisco-Oakland-Berkeley MSA experienced outsize declines

While Bay Area home owners saw sizable price declines for their homes in November, not all news were bad. The amount of listings actually declined month-on-month in November. Given the strong inverse relationship between real estate prices and number of active listings, we could see some price supports for the San Francisco MSA in the coming months if the number of active listings continue to decline. On the other hand, the tech sector are seeing some major layoffs in the past few months, and the Bay Area economy relies heavily on tech. This could translate into further housing price weakness in the months ahead.

The Bay Area’s property prices are really taking it on the chin in the past six months. Our analysis indicate the average listing home price dropped by a whopping $110,000 between June 2022 and November 2022, according to Realtor.com data. That’s more money than what most people make in a year in this country. Looking at this another way, if you purchased a property in the San Francisco-Oakland-Berkeley area in June, it is akin to working a year (or more) without getting paid.

See ApexaVision.com’s real estate dashboard for zip-code and county level real estate data and run your own analysis.

Some regions managed to eked out price gains

Not all MSAs experienced price declines in November. A few MSAs managed to scrape together price gains. These MSAs include Kansas City in Missouri, the Portland-Vancouver-Hillsboro area, and Cincinnati, Ohio. Interestingly, both Cincinnati and Kansas City MSAs’ property prices held up during the past six months, when the vast majority of home prices across the US tumbled by an average of 8%. 

Looking ahead: Keep your money in your pocket

While everyone’s circumstance is different, it is probably a good idea to see what the first half of next year brings before purchasing a property. Economists are sounding alarm bells to a potential recession in 2023, and interest rates remain high (a 30-year mortgage’s interest rate stands at 6.5% as of this writing), making home-ownership affordability low. From an investors’ perspective, I would rather wait and see how things unfolds for the next six months. However, if you feel very secure about your employment, and you come across a good property deal, it could still be a good long-term decision to take the plunge. After all, real estate is one of the best investments to build long-term wealth, in my opinion.