THE OUTLOOK: North Berkeley & the Berkeley Hills, Q3 2024 wrap-up

The most interesting news in real estate lately has not been about the local market, but rather about interest rates and Federal Reserve policy. Over the summer, the expectation was that we were reaching the point where the Fed would start lowering interest rates. After 11 increases in the Fed’s interest rate target from March 2022 to July 2023, and more than a year at the July 2023 peak, the Fed reduced its target rate on September 18th. The cut was widely expected, and interest rates on home loans started falling in early September in anticipation. Rates on home loans lately have been in the low 6% range, compared to almost 8% in October of last year.

How have the lower rates affected real estate activity locally? Overall, I haven’t seen a big change yet. Interest rates are still much higher than the 3% that many homeowners have on their existing loans, so rates remain a disincentive for people to move for the sake of a bigger or smaller home. The effect on buyers has been mixed. Some buyers have been taking advantage of the increased purchasing power they have with lower rates, but I think more have been holding back, hoping for further interest rate reductions.

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Berkeley Hills, third quarter 2024 results:

Market results for the summer quarter (Q3) in the Berkeley hills are more in line with the “buyers are holding back” storyline. The median sold price in the hills was $1,450,000, which is down 9% from the previous quarter, and down 20% from Q3 last year. That sounds pretty bad, but results for price per square foot are much more neutral. At $877 per square foot for the quarter, average sold price per square foot is down 2% from the previous quarter, but it’s up 3% from a year ago. Price per square foot is generally a better representation of how the market is doing, because it is less affected by differences in the types of properties that sold.

Six of the hills properties that sold in Q3 had price reductions before selling, and average days on the market was up a bit to 25 days. 77% of the sales were above list price; those sold, on average, 25% over list.

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North Berkeley, third quarter 2024 results:

Looking at market results for the 3rd quarter (Q3) in North Berkeley, there were a lot more condos than normal in the sales. 27% of the Q3 2024 sales were condos, compared to only 7% last quarter, and 13% a year ago. Condos sell for less, and for less per square foot, so having more condos in the data pulls down both price statistics.

In North Berkeley for Q3, the median sold price was $1,456,000, which is down 36% from the previous quarter, and down 5% from Q3 last year. Average sold price per square foot was $891, which is down 17% from the previous quarter, and down 11% from a year ago. These declines primarily reflect the large number of condos that sold. I would say the value of individual properties has been pretty stable.

Only two North Berkeley properties had price reductions before selling, and average days on the market was 20 days. 92% of the sales were above list price, and those that went over list price sold, on average, 26% over.

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Already this fall, I’ve seen buyers who were sitting on the sidelines last year starting to shop for homes again. If interest rates continue heading downward, buyers will be even more motivated going forward.