Perhaps it was inevitable – what goes up, up, up, must eventually come down. Bay Area homes are now selling for less than they did a year ago, the only part of California where this is true, as rising interest rates continue to throw cold water on the market. the region’s once-hot pandemic real estate market.

In September, the median price of existing single-family homes in the nine-county area was down 2.6% from the same month in 2021, though a still-high price of $1.26 million, data shows. from the California Association of Realtors. It was the third consecutive month of year-over-year declines.

Oscar Wei, the association’s deputy chief economist, said the reason only the Bay Area is seeing a decline could be because more people are leaving the area. Also, home prices are more likely to fall here after peaking last year than anywhere else in the state.

But on a monthly basis, prices across California have fallen since interest rates began to rise earlier this year, pushing up monthly payments and crowding many buyers out of the market.

“The end result is always about interest rates,” Wei said. “In the coming months, I wouldn’t be surprised if we continue to see lower prices.”

The Bay Area actually saw a slight price increase from August to September. But Wei attributed that to a short-lived stock market boost – prompting some players in the region’s tech industry to cash in some of their large investment portfolios and buy a house.

Year-over-year, San Mateo County saw the largest price decline of any major Bay Area county, with median prices down 5.8% to 1.86 million of dollars. This was followed by San Francisco with a 5.7% decline to $1.65 million; Alameda County down 4.6% to $1.24 million; and Contra Costa County with a 1.7% decline to $882,000.

Santa Clara County, meanwhile, bucked the trend, with prices rising 4.3% to $1.7 million.

While prices there remain higher than a year ago, Ramesh Rao, a Silicon Valley real estate agent, said his local market has cooled significantly since the start of this year.

For most of the pandemic, house hunters – many of whom were unattached to the office by remote working and buoyed by historically low interest rates – had been locked in a mad rush for homes, bidding up sometimes hundreds of thousands of dollars over the asking price, he said.

“Where I really see a change in the market is that sellers used to get whatever they wanted in June,” Rao said. “If people still have the same perception of the market, the houses are on the market.”

The shift came as the Federal Reserve began raising the cost of borrowing this spring in an effort to curb runaway inflation. The rate on a 30-year fixed mortgage jumped as a result, hitting 6.94% this week, from a low of less than 3% at the height of the pandemic.

A non-conforming home loan over 30 years averaged 7.34% Bankrate.com. In the Bay Area, a nonconforming loan, also known as a “jumbo” loan, is a mortgage that exceeds $970,800.

This meant that even though house prices were falling, the real cost of home ownership for many potential buyers was skyrocketing.

According to a real estate agent.com mortgage calculator, the monthly payment for a 30-year fixed mortgage for a $1 million home, with a 20% down payment, was over $6,500 at today’s interest rates. That compares to about $4,500 — including property tax and insurance — when interest rates were lowest during the pandemic.

As interest rates are expected to continue to rise, Rao said buyers have started looking beyond traditional home lending — to adjustable rate mortgages, interest rate buyouts and seller financing.

“All the creative funding from the 80s and 90s, they’re coming back,” he said.