Is now the hardest time to buy a Bay Area home?

Rising home prices. Growing demand from first-time buyers. A near-record-low number of homes for sale. Bidding wars flying $1 million over asking prices.

Is this the toughest time to buy a Bay Area home?

Affordability has neared all-time lows, with home prices climbing far faster than incomes.

Bay Area buyers without healthy cash reserves, big down payments and quick decision-making are getting left at the starting gate.

In January, real estate analysts saw the fastest rise in U.S. home prices over any 12-month period in 45 years.

But don’t just look at the numbers – ask Pinky Abrenilla and Chip Fernandez. The East Bay couple had an expiring lease in the Berkeley Hills and were determined to move by the end of March.

They spent four months touring almost 100 open houses, lost bids every other week, and collected a novella’s worth of disappointments before finally landing a $788,000 fixer-upper in Concord. Abrenilla doesn’t love the neighborhood or the $60,000 in needed repairs. But it was better than most of their other choices.

“It’s not,” she said, “going to be our forever home.”

In the Bay Area, agents and economists say the decade-long rising market has grown increasingly frustrating for buyers. Data from the California Association of Realtors (CAR) paints a stark picture: The number of Bay Area single-family homes for sale in January dropped by 40% from the same month in 2020.

At the same time, the typical home in the nine-county region sold for nearly 6% over asking price – a higher premium than any January since CAR started tracking the data in 1995. Bay Area houses have typically sold for at or below list prices. The median price of a single-family home was $1.25 million at the end of last year.

And the premiums for single-family homes in the core counties have escalated to recent, record highs, according to the data. San Francisco homes sold, on average, more than 21% over list price in February, while Alameda County prices went 17% higher than list price, followed by Santa Clara (nearly 17%) and San Mateo (13%) and Contra Costa (6%) counties.

The typical home in Santa Clara and San Mateo counties in February sold in 7 days, the fastest time since CAR began tracking days on the market in 1995. Alameda and Contra Costa county homes sold in a near-record 8 days.

“It definitely is the most competitive era we have seen,” said CAR economist Oscar Wei.

Buyers are also having a harder time affording homes than any time since 2008, before the real estate bubble burst, according to real estate data. The CAR affordability index, a measure of home prices, mortgage rates and incomes, estimated that less than one-quarter of Bay Area families had the financial wherewithal to buy a home at the end of last year. Bay Area affordability dropped slightly from the previous year and is half of its peak level in early 2012.

By comparison, half of working families in the U.S. can afford to buy a home.

When will it get better?

Historically, the busiest home-buying season is spring and early summer. Wei expects inventory to pick up, but maybe not enough to satisfy all the buyers in the market.

And the stories from real estate agents around the region point to hard times for buyers. The influx of millennials looking for their first home, the fear of faster-rising mortgage rates and a push to convert volatile stock portfolios into property have super-charged demand. Many sellers have been reluctant to move and face their own daunting home search, pinching supply.

Saratoga agent Mark Wong has seen a half-dozen Silicon Valley homes recently sell for more than $1 million over listing. “There’s a lot of competition for the right house,” he said.

“It’s never been harder everywhere,” veteran Fremont agent Sunil Sethi said in an early March email. Since then, he said, the market loosened up for a week as the Russian invasion of Ukraine played havoc with the economy and spooked buyers.

But, he said, the frenzy has returned. Sethi received offers this month for two homes he hadn’t formally put on the market, both for more than $300,000 over the initial asking price. The sellers waited to hold an open house before accepting a deal.

Sethi believes today’s market is a bit less crazy than the 2007 rush to buy Bay Area homes, but current buyers meet tougher loan standards and have better incomes.

For Abrenilla, a retail manager, and Fernandez, a business analyst, the hunt began in mid-November, when their long-time landlords announced they would be moving back into the home. The landlords offered a $10,000 bonus if the couple would leave by March 31.

The middle-aged couple loved their rental, the neighborhood, and the proximity to Abrenilla’s two sisters. But nearby fixer-uppers were selling for $1.1 million, just outside their budget. They explored the East Bay with agent Matt Rubenstein.

He estimates he looked at more than 30 properties with the couple. “They had to manage their expectations and change strategies a few times,” Rubenstein said.

Abrenilla and Fernandez’s first offer on a Martinez home came in second place, despite their heartfelt thank you note and plea to the owners. Other rejections followed.

They got creative, looking for homes that could produce income with a backyard apartment, and asking family members if they wanted to make a purchase together. They considered buying a waterfront property in Marin County and renting out boat slips.

Fernandez and his brother-in-law visited one home together in Oakland, only to discover a car stripped of its wheels and perched on bricks near the open house. Hard pass.

Another hillside home in Oakland seemed ideal – except for the precarious three flights of stairs that needed to be replaced just to get into the front door.

At one point, Abrenilla spotted a gem, but the open house was on Christmas day. She figured they could tour it a few days later. It sold before they got the chance.

After a few weeks, the couple started a spreadsheet of most of the homes they visited, evaluating each by price, school district, affordability, potential for rental income and estimated renovation costs. They became obsessed. “Literally, every day off since November has been an open house,” Abrenilla said. “Open house, bid. Open house, bid.”

She said she gave up on finding a “forever home” after losing their fifth bid.

The spreadsheet grew to more than 70 homes, and things were getting desperate. The couple considered renting another home.

But they came across a four-bedroom, two-bath house with a pool in Concord, just a few blocks from De La Salle High School. They agreed to buy it as-is, fixing any problems, major or minor, out of their own pocket.

The couple closed last week.

“I love the Bay Area,” said Abrenilla, a San Jose native who has also lived on the East Coast. “But the experience of house buying here is not fun. … At the end of the day, it’s a transaction.”