Home prices in Vallejo experienced a small drop in January, caused by higher interest rates and the end of a four-year buying streak. Still, real estate agents say the market is normalizing, real estate agents said.
As of January, the median price of a home in the Vallejo metro area was $552,000, down 1.4 percent compared with $560,000 in January 2023, according to real estate brokerage Redfin.
“Price drops are a trend nationally and in the Bay Area,” said Pippin Dew, president of the Solano Association of Realtors. “In my experience, it’s because interest rates went up significantly. Earlier, people were able to get mortgages at 3 percent and now it’s in the 7 percent range. That stifles interest.”
The high interest rates can also discourage people from putting their homes on the market, Dew said. The agent noted that 80 percent of all Californians with mortgages have interest rates of 5 percent or less, according to statistics from the California Association of Realtors.
“They are not too excited to sell and then have to pay more interest on their new homes,” said Dew, a former Vallejo City Council member running for Vallejo Mayor.
The good news is that rates are trending down, she said, and it looks as though the Federal Reserve Bank might reduce the overnight bank rate, which would influence mortgage interest rates downward.
Rates reached the 8 percent range at one point, but have decreased, “and that has definitely stimulated demand,” Dew said.
The numbers bear this out.
Home sales were up 7 percent in Vallejo in January, with 243 homes selling that month. Homes are selling faster: the typical home was on the market only 49 days, a 15-day drop compared with January 2023.
In the eyes of Solano County real estate agent and Vallejo resident Rose Vallejo-Arriaga, “We are coming to a time when things are normalizing.”
During the early years of the pandemic, home sales spiked in Vallejo and other areas far from job centers, as employees became able to work from home, Vallejo-Arriaga pointed out.
“Because they could work from home, they were able to move to an area that was more affordable,” Vallejo-Arriaga said. “Solano County was a destination for that, and we were overwhelmed with people wanting to purchase.”
Inevitably, the rush of buyers drove prices up. Home prices are up 23 percent from their pre- pandemic levels, with the median home sale price in the Vallejo metro area rising from $447,000 in January 2020 to $552,000 in January, according to Redfin.
Now, the rush has subsided and the market is settling down, Vallejo-Arriaga said.
Dew echoed Vallejo-Arriaga’s comments.
“If interest rates are reduced, it won’t happen until summer, so we can expect a relatively level market until then,” Dew said. “I think we’re going to see a steady increase in both supply and demand and a gradual upward trend in prices.”
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