Low interest rates driving sales as Bay Area home prices set record

The median price of a home in the San Francisco Bay Area has shot past $1 million, according to the California Association of Realtors. The association also saw a record number of homes sold last month despite the pandemic.

The California Association of Realtors said buyers are motivated to purchase homes amid the lowest interest rates ever and that’s led to the fastest sales growth in a decade.

“We are super excited,” said Eric Rise of San Jose. “I’ve been teaching 24 years and I never thought I could own a single family home.”

Eric Rise and his family just moved from a townhouse into a three bedroom, two bathroom home with an office and yard space in Almaden Valley, closer to his children’s school. The cost of the home was $1 million.

“We were able to find this compared to things that were substantially over,” said Rise. “We were kind of at our max.”

According to the California Association of Realtors, 465,000 single family homes were sold in the state in August. It’s the highest level in more than a decade.

While the median price of a home in California is $706,000, in the Bay Area, it’s $1,068,000. This time last year, it was $900,000, which is an 18 percent increase.

“There’s been a pent up demand for homes for the last several years and we’ve had a low supply of homes available for sale,” said Doug Goss of the Santa Clara County Association of Realtors.

While some people are leaving the Bay Area able to work remotely during the pandemic, realtors said, many people still want to live here.

“This is an area that is surrounded by high-tech employers that are willing to pay a lot of money for you to work for them even if you want to live here,” said Rick Smith of Kelller Williams Bay Area Estates. “The weather here is wonderful.”

Smith sold a 759-square foot, one bedroom, one bath house on busy Naglee Avenue in San Jose for over asking price $1,055,000.

The new owner plans to tear it down and rebuild. Smith said, the biggest factor pushing up home sales is the historic low interest rates.

“In the two percentile, 2.5 percent, 2.7 percent, when it's this low you are seeing people able to afford more house,” said Smith.

“Everyone’s just refinancing or buying a new place,” said Rise.

Rise feels lucky to have found a home in his price range.

“I was surprised,” said Rise. “I thought during Covid to be looking for a house but apparently there's a lot of houses out there, a lot of people. Everything we looked out, there were multiple people looking at them.”

According to the California Association of Realtors, the most expensive place to live in the state is San Mateo County where the median home price is $1.8 million. Santa Cruz County was the only county in the region with a sales decline. The association said the wildfires may have contributed to the slowdown.