July 2018 Year-to-Year data shows that sales have declined on the sub 500k segment. According to the CALIFORNIA ASSOCIATION of REALTORS, this is not due to inventory shortage, but rather the demand issue; I’ll say that it’s an absolutely true statement regarding the housing market in the Bay Area.
To support the CAR statement, there are few numbers we must check. Existing home sales are going down by 4.3%, while the inventory is up 3.1% compared to the same time last year. These numbers suggest that they don’t have a direct relationship since the increased inventory number should have made a positive impact on sales. An average price per square foot has gone up by 7%, median home prices have increased 7.6% and the affordability Index that is down 3% suggests that house prices have continued on the all-time high position and the buying power is getting worse. Other things such as climbing interest rate and the big company moved out of California to a much more affordable place for their new expansion, e.g. Amazon HQ2. The Millennials who fill the majority of entry-level houses are moving out of California, which has caused weaker demand for the sub $500k market.