Tariffs and Weak Labor Data Cool Housing Prices? August Bay Area Report

DW HOMES
Sep 3
3 min read

Updated: Sep 12

The Trump administration reached a trade agreement with Japan, reducing tariffs on Japanese cars from 27.5% to 15%, while maintaining steel tariffs at 50% and lumber tariffs at 25%. This has driven up construction material costs, with Bay Area building costs rising an additional 5% from last month, forcing developers to delay mid-tier housing projects and reduce new home supply. Meanwhile, August labor data showed only 73,000 non-farm jobs added, far below the expected 115,000, with the unemployment rate rising to 4.2%, heightening concerns about the economic outlook.

Stock Market Volatility: Investors Turn to Gold and Real Estate for Safety

Amid tariff policies and weak employment data, the S&P 500 rose 2.2% in August, but market volatility has intensified, prompting some investors to seek safer assets like gold and real estate. Gold prices have surged 26% this year, reaching $3,500 per ounce. In the housing market, mortgage rates remain high at 6.5%, pressuring buyers’ affordability. Both inventory and sales volumes in the East Bay and South Bay have declined, reflecting caution among buyers and sellers amid economic uncertainty.

East and South Bay Market Overview

In August, the East Bay saw 2,890 listings, a 28.2% year-over-year increase, though down from 3,072 last month, pushing the median home price to $1.16 million, marking the second consecutive month below $1.2 million. Sales volume reached 1,360 units, down 4.5% from last year.

In contrast, the South Bay saw listings drop slightly to 569, a 38.7% year-over-year decline, with median prices falling from $2.1 million last month to $1.88 million, though still up 1.1% from last year. Sales volume was 725 units, down 11.4% year-over-year.

Both regions show clear differences, with buyer hesitation growing due to labor data and tariffs, shifting the market from divergence to an overall cooling trend, with both buyers and sellers remaining cautious.

Regional Data Breakdown

880 Corridor:

Listings: Generally up, with Fremont’s listings rising from 78 to 126, a 61.5% increase.
Prices: Most cities saw declines, but Berkeley, Castro Valley, Fremont (from $1.8M to $1.8725M, up 4%), and Newark saw gains of 3.5%, 6.2%, 4%, and 5.2%, respectively.
Sales Volume: Mixed results, with Castro Valley surging 51.4%, Hayward and Newark slightly up by 1.5% and 4.2%, but Fremont, Oakland, and San Leandro dropping 23.4%, 13.6%, and 30.9%, respectively, reflecting buyer caution amid economic uncertainty.

Central Contra Costa:

Listings: Generally up, with Concord and Martinez seeing increases of 30.4% and 51.1%, respectively.
Prices: Across-the-board declines, with Walnut Creek dropping significantly by 10.4%.
Sales Volume: Overall up 3.5%, with Clayton surging 80%, Pleasant Hill up 36.8%, and Martinez up 25.9%, but Concord and Walnut Creek down 4.2% and 18%, respectively.

ALMORINDA:

Listings: Slightly up, with Moraga increasing by 5.6% year-over-year.
Prices: Lafayette rose 30.5%, but Moraga and Orinda fell 11.8% and 24.2%, respectively.
Sales Volume: Moraga doubled with a 100% increase, while Lafayette dropped 33.3% and Orinda fell slightly by 4.5%.

Tri-Valley:

Listings: Up across the board, with Dublin and Danville rising 89.3% and 49.3%, respectively.
Prices: Most cities saw slight declines, but Alamo and Danville rose 17.8% and 0.9%, respectively.
Sales Volume: Pleasanton slightly up by 1.8%, while other cities declined, with Danville dropping 27.5%.

Santa Clara County:

Listings: Generally down, with Saratoga and Los Gatos dropping over 82% and 68%, respectively, and Los Altos down 47%.
Prices: Most cities saw declines, with Los Altos Hills dropping 25.9%, but Campbell, Los Gatos, Mountain View, Palo Alto, and San Jose rose 14%, 6.7%, 7.9%, 25%, and 3.3%, respectively.
Sales Volume: Palo Alto up 11.5%, Santa Clara slightly up 5.3%, but Los Gatos, Saratoga, and Sunnyvale down 33.3%, 51.9%, and 19.7%, respectively, with Los Altos Hills and Los Altos dropping over 27%.

Market Outlook and Future Trends

The Federal Reserve initially projected 2-3 rate cuts in 2025, but tariffs and weak employment data may accelerate cuts, impacting mortgage rates. Although late summer is typically a peak season for housing, this year’s rising costs from tariffs and disappointing job data have led to lower-than-expected sales. If the economy stabilizes, home prices could see a slight rebound by year-end, but high interest rates and cautious sentiment may continue to suppress sales volume. What do you think?