San Francisco’s real estate market has remained much the same throughout the fall. Rising interest rates continued to discourage sellers from selling, and buyers from buying. In San Francisco 251 homes were sold in September, down 23 percent from the previous year.
Homeowners are reluctant to sell their homes now because of the cost of securing a replacement home. And those who do choose to sell their homes often have unrealistic expectations when it comes to the value of their properties.
“San Francisco sellers are not quite up to date on the market. They are being overly aggressive on pricing,” said Eileen Mougeot with Corcoran. “Everyone has heard about high mortgage rates, but insurance has also become a big deal. And between these two things, buyers are being more cautious. They still want to buy, but they are just being a lot more conservative.
PEAKS AND VALLEYS
“Sellers are having a hard time accepting this,” Mougeot continued. “I’m seeing a lot more prices reduced, and if they aren’t reduced, homes are on the market for a lot longer — particularly at the higher end of the market. Sellers are just not going to get what they were going to get a year and a half ago.”
San Francisco home prices peaked in April 2022. The median price of a single- family home that month was $2.1 million, and the median price for all San Francisco homes that month was $1.6 million. In September 2023, those median prices had fallen to $1.65 million and $1.4 million, respectively.
Of course, even with these declines, San Francisco remains a expensive place to live. In fact, according to a recent Business Times report, the San Francisco metro area actually stands atop the rest of the United States as the most unaffordable area in the country.
The report quotes statistics from the Bureau of Economic Analysis’ Regional Price Parity Index, which measures how the prices of goods, housing and other services in particular metropolitan areas compare to the national average. For the purposes of this study, the San Francisco metro area includes Berkeley and Oakland.
And yet, foreclosures are not an issue in ultra-expensive San Francisco. Across the country foreclosures are surging, up 34 percent from a year ago according to an October realtor.com report. That’s simply not the case in San Francisco.
Where are foreclosures rising? According to the report, cities with the highest rates of foreclosure include Houston, Atlantic City, Cleveland, Bakersfield, and Columbia, South Carolina.
What’s more, according to an October Business Times report, Bay Area workers who took advantage of remote work during the pandemic to move to far away, lower-cost cities may now find themselves in a painful predicament if called back to the office.
Some of the hottest cities for those joining the Bay Area exodus — called “Zoom towns” for the frequent videoconferencing remote jobs required — are seeing home prices fall sharply from their pandemic peaks. August’s median home prices in Austin, Dallas, and Boise, are all down 18 percent from their peaks reached in May 2022.
The falling prices in these destination cities would have remained simply paper losses if not for a growing number of Bay Area companies abandoning their embrace of remote work in favor of hybrid schedules that require employees to report to offices part of the week.
If these once-Bay Area workers decide to return, not only will they lose money on their recent home purchases, they’ll have to walk away from low-rate mortgages secured before the Federal Reserve began its anti-inflation campaign.
That is a tough spot in which to be.
According to Mougeot, young families still want to live in San Francisco. Clearly, downtown is a problem, but neighborhoods throughout the rest of the city have tremendous appeal.
“Anything that comes on the market between $1.3 million and $1.8 million, or even $2.2 million, still attracts a lot of attention,” Mougeot said. “You’re likely going to find more than one buyer making offers.”
And what about San Francisco’s downtown area, where there’s a record office space vacancy rate of 33 percent? Will the AI industry save this neighborhood, bringing in hordes of workers as tech companies have done in the past?
Not according to a San Francisco Chronicle report. So far, the multibillion-dollar AI boom centered in the city has been slower to hire than former startup companies like Twitter and Uber, which in their early stages filled offices with thousands of new employees. AI companies are simply much less extravagant with their spending — to make the money they have last longer, and to give themselves a better shot at long-term viability and profit.
It will be interesting to see where all of this leads.
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