San Francisco’s Real Estate Market Adapts to Shifting Conditions
In September, San Francisco witnessed another decline in median home sale prices. However, there was a glimmer of hope as more new listings entered the market than in the preceding 12 months. Despite this positive development, the overall quantity of new listings still lags significantly behind long-term historical averages, creating a sense of uncertainty in conjunction with the rise in interest rates, as outlined in a recent report by real estate firm Compass.
Notably, while September typically heralds a surge in new listings in the region, this year’s increase was considerably more modest compared to the volumes observed in 2020 and 2021.
With interest rates reaching their highest point in over two decades, both buyers and sellers are grappling with the need to recalibrate their expectations. Sellers are investing more time in selecting the right agent, and buyers are exploring unconventional financing options. Nevertheless, a sense of being “stuck” prevails, resulting from the unique market conditions brought about by these unprecedented variables.
Furthermore, the predictability of home sales in the Bay Area has been disrupted. Some properties find eager buyers swiftly, while others linger on the market. The market’s behavior has become rather unpredictable, creating what can be described as a “Jekyll and Hyde” scenario. This departure from conventional trends has rendered the market more balanced, offering neither buyers nor sellers a clear advantage. Both prices and sales numbers are regressing from their 2022 peak, reverting to 2019 levels.
The third quarter of this year saw an overall decrease in home prices in San Francisco, with a decline of 6.5% since 2022. Condo sales prices also fell by 4% in the same period, and the number of home sales decreased by approximately 22%, according to Compass data.
Sales of luxury homes in San Francisco, valued at over $5 million, returned to more typical levels in September after a notable surge in August. The augmented inventory may set the stage for a busy October, although it remains uncertain.
Real estate agent Dan McLean from Coldwell Banker Realty expressed that the real estate market in San Francisco currently feels sluggish. Drawing parallels to the Great Recession in 2008 and 2009, McLean noted that he had more business during that period than he currently has. Most real estate agents are experiencing a notable reduction, with approximately half the business they had last year.
The California Association of Realtors presented its 2024 outlook, forecasting a real estate market rebound in the state. As inflation subsides and the economy decelerates, mortgage rates are expected to decrease, thereby enhancing the purchasing power of prospective buyers.
In the San Francisco metro area, potential homebuyers require an income of $275,000 to afford a home at a 7% interest rate with a 20% down payment, according to Zillow.
The association predicts a 6.2% rise in California’s median home price, reaching $860,300 in 2024, after experiencing slight decreases in 2022 and 2023.