More evidence the shine is fading from California's golden housing market, resale home sales in the San Francisco Bay Area dropped by more than 20 percent in some areas in October.

The nine-county San Francisco Bay Area saw resale sales dip 7.4 percent, according to DataQuick, the real estate information service division of La Jolla, CA-based Acxiom Corp.

Hardest hit in the San Francisco Bay Area was the city and county of San Francisco where sales tumbled 20.3 percent, according to DataQuick. Santa Clara County, also known as Silicon Valley, saw single-family resale home sales plummet 18.4 percent.

Using a different data base and tracking method, the California Association of Realtors (CAR) also reported a slippage of 17 percent in home sales in Silicon Valley and 8 percent in San Francisco.

Regional significance

Blame Wall Street turbulence, spikes in mortgage rates and a softening jobs market for the first Bay Area-wide sales dip in two years.

"The slower October market represents a temporary pause as consumers take stock of recent fluctuations in interest rates and in the equity markets," said CAR President Diana Bull.

Also, a new group of less well off consumers are doing the bulk of the Bay Area's home shopping these days.

Many of the stock-option rich buyers who made the Bay Area housing boom of the 1990s happen have already purchased their homes and moved in. Others who decided to hold onto their shares probably wish they hadn't. Today's potential buyers are more often traditional wage-earners skittish about their hard-earned income as the holidays bear down.

In any event, Bay Area sales slippage is significant because Silicon Valley and the San Francisco Bay Area set the pace for California and California trends often spread nationwide.

By the numbers

A total 5,872 resale homes were sold in the nine-county San Francisco Bay Area in October, down 5.8 percent from 6,234 the previous month and down 7.4 percent from October 1998's 6,338 sales, according to DataQuick.

The year-to-year decline was the first since September 1996 when sales decreased 1.3 percent from 4,561 to 4,503.

Some of last months' decline was also due to exceptional sales a year ago, DataQuick says.

"It looks like some of the last months' sales were put off temporarily when mortgage interest rates jumped during the first week. Those escrows became active again when interest rates went back down a week later. What this probably means is that some October closing are happening in November instead," said Mike Ela, of DataQuick.

The employment factor

In the Silicon Valley-Santa Clara County high-tech mecca, where sales slipped from 1,449 in 1997 to 1,182 in October, the job market is a growing factor.

High-tech industries have cut quadruple the number of jobs they did a year ago, accounting for more layoffs than most other job sectors, according to Challenger, Gray & Christmas Inc., a Chicago-based international outplacement firm.

Job counselors in Silicon Valley's career resource centers also report more job seekers taking longer to find jobs. Likewise, Silicon Valley companies are taking longer to make decisions about filling jobs while freezing more and more positions.

Elsewhere in the Bay Area, more negative sales numbers showed up in San Mateo (down 9.2 percent), Alameda (down 7.8 percent), Sonoma (down 3.9 percent) and Marin (down 3.4 percent) counties.

Prices help keep boom alive

The end of Santa Clara County's boom market began to reveal itself earlier this year.

Inventories have ballooned more than 100 percent since January, and, as a result, October's $305,475 median housing price reflects the fourth consecutive fall in prices since they peaked this year at $318,000 in June, according to the San Jose Real Estate Board, which covers Santa Clara County (Silicon Valley).

October 1997 to October 1998 prices, however, remain up in San Francisco by 11 percent and 8.1 percent in Santa Clara County indicating the powerful San Francisco Bay Area market has not gone completely bust.

Published: December 4, 1998

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