America's Most Expensive Area Sees Surge in People Trying to Sell Homes

Silicon Valley and the Bay Area have seen an explosion in the number of for-sale homes this spring, in what analysts think may be a telltale sign of brewing troubles in the tech sector.

Why It Matters

The Bay Area, one of the most affluent and expensive major urban regions in the country, reported the highest level of inventory since before the pandemic in February, according to data from the California Association of Realtors (CAR). In March and April, this trend continued, with more sellers listing their properties on the market.

On one hand, this growth is great news for aspiring homebuyers who have been struggling with low inventory and high prices for the past few years. On the other hand, inventory has far outpaced sales in the region, showing that buyers remain reluctant to engage with the market as prices are still high. In March, the latest data made available by CAR showed prices increased all across California, with the Bay Area reporting a 1 percent hike.

What To Know

Last month, according to data from Realtor.com, the San Francisco-Oakland-Hayward metropolitan area had a total of 6,208 homes for sale listed on the market—the highest level since July 2022, when it reached 6,246. It was up 43 percent from a year earlier, marking the fourth month of consecutive growth after an increase of 21 percent reported in April, 27 percent in March, and 21 percent in February.

This is not a positive comparison: back in summer of 2022, San Francisco and the Bay Area were experiencing an exodus of residents relocating to more affordable, more livable cities in California and out of state, and the City by the Bay was in the midst of a crisis.

At the heart of the American and global tech sector, Silicon Valley, housing inventory was at its highest level in a decade, according to real estate analyst Nick Gerli, founder and CEO of Reventure. Last month, the area—the most expensive in the country with a median price of about $2 million—had 1,741 homes listed for sale, up from 1,015 a year earlier.

Based on Realtor.com data, active listings in the San Jose-Sunnyvale-Santa Clara metropolitan area, which includes Silicon Valley, were 68 percent higher year-over-year in April, after the three month-to-month hikes in April (up by 25 percent), March (up by 41 percent), and February (up by 33 percent).

According to Gerli's analysis, inventory is so high in Silicon Valley because a lot of sellers tried to preempt a market slowdown by selling early in the year, in February and March.

This inventory is still sitting in the market because of what Gerli called a "big slowdown in homebuyer demand." Data from Redfin shows that home sales in March were around 1,000, 18 percent below the typical level for that month.

"Silicon Valley's housing market is very exposed to mortgage rates, as 82 percent of purchases in 2024 utilized a mortgage to facilitate the transaction," Gerli wrote on X, formerly Twitter. "So long as mortgage rates remain near 7 percent, buyer demand in the southern Bay Area is likely to be subdued."

As of May 8, the 30-year fixed-rate mortgage was 6.76 percent, according to Freddie Mac.

"Weakness in this local housing market could be a sign of a slowdown in tech, and is often related to stock market volatility," Gerli said.

While the tech sector seems to have turned the page on the worst of its workforce crisis, tech companies are still announcing mass layoffs. Earlier this week, Microsoft announced the layoff of nearly 3 percent of its entire workforce, about 6,000 people. In April, Intel announced plans to lay off more than 21,000 employees, about 20 percent of its total workforce.

According to data by Challenger, Gray & Christmas cited by the Los Angeles Times, tech companies announced 17,874 cuts in the first quarter of the year alone.

While home prices and home values in the area are still rising compared to a year ago, Gerli said that they have started to slide down on a monthly basis. According to Zillow, monthly valuations dropped by 0.73 percent from February to March, "one of the largest drops for any large county in the U.S."

Data from Mary Pope-Handy & Clair Handy show that the median price of a single-family home in Santa Clara County, within Silicon Valley, was down 1 percent year-over-year in April, at a still-staggering $2,130,000. Active listings were up 24.8 percent, and sales were also up 23 percent.

What People Are Saying

Real estate analyst Wolf Richter wrote: "It's not that new listings are that high; they're not. It's that the homes that have been listed for sale aren't selling, and the new listings pile on top of it, and overall inventory is suddenly ballooning at an astonishing rate."

Jordan Levine, CAR chief economist, told SiliconValley.com that the region is making "progress down the road to recovery." Rising inventory, he said, "helped to keep price growth more modest rather than the double-digit price growth that we saw a few years ago."

Jeff Bellisario, executive director of the Bay Area Council Economic Forum, told SiliconValley.com: "While we seem to have moved beyond massive layoffs from the region's tech titans, it is clear that the process of right-sizing is still ongoing in many tech companies."

What Happens Next

It is not yet clear whether inventory will remain this high in the Bay Area and Silicon Valley in the coming months.

While the increase could have been a "one-time event in anticipation of policy changes under [President Donald] Trump, as well as heightened stock market volatility," Gerli said, the analyst said he feels confident saying buyers' demand will remain "sluggish" through 2025.

Zillow expects home prices to drop by 5 percent in the Bay Area this year. "Sellers are coming back to the market and in bigger numbers than buyers this year," senior economist at Zillow Kara Ng told NBC Bay Area. "As a result, sellers are cutting prices."