Home prices in the San Jose and San Francisco markets are expected to drop over the next year, according to Zillow.
The real estate company is forecasting that San Jose will see the largest decrease in home prices over the next year within the top 100 metro areas in the United States, saying they’ll fall by 6.1%.
Zillow also predicts San Francisco will see a 4.8% decrease.
The company said there are a few factors, writing in an email, "…in expensive and highly dense markets like San Jose, current mortgage rates are still extremely high compared to what many hopeful homebuyers would wish for, and builders have limited opportunities with a severe lack of available land."
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Zillow added that it expects those factors to slow San Jose’s housing market and lead to lower prices.
"Theoretically, I think it makes sense," Compass realtor Brett Caviness said. "Obviously our consumers have been concerned with interest rates going up. Obviously prices are very high in our area, but the reality is the demand is still very, very strong. What we’ve been seeing is buyers are still buying. They’re just having to get realistic about their purchase price, and that has been knocked down a peg or two."
Zillow also wrote that potential sellers may be more willing to put their homes on the market if interest rates go down next year.
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Caviness said it’s tough to predict. While there are not many bidding wars right now, lower prices could bring more buyers into the market.
"While we’re talking about prices possibly trending down, we saw that at the beginning of 2023, but by July of this year we saw year-over-year prices actually increasing, and that’s continued now through November," Caviness said.
Zillow does adjust its predictions, and over the summer announced it expected home prices to go up year over year.
Some homeowners who bought in the last few years are glad to have locked in a lower interest rate before they started affecting the market.
"We got lucky," Angelica Fuentes of San Jose said. "Then we started looking at the same houses in our area bumped up so high and we saw them and the rates went so high."
