Real Estate

Not Quite ‘Impossibly Unaffordable’

(Garey De Martini)

San Francisco was just ranked among the top 10 most “impossibly unaffordable” cities in the world, according to a recent CNN report. It wasn’t the planet’s most unaffordable city — that honor belongs to Hong Kong, in the No. 1 position.

San Francisco wasn’t even among the top five most impossibly unaffordable, though the California cities of San Jose and Los Angeles came in at No. 4 and 5 respectively. No, San Francisco placed in the eighth position, tied with Adelaide in Australia. For good measure, San Diego came in just behind these two, in the No. 9 spot. So four of the most impossibly unaffordable cities in the world are in California. Australia had three cities on this list, and Canada had two cities included. Honolulu came in at No. 6.

The report measures affordability using a price-to-income ratio of the median house price divided by the gross median household income. And there’s the rub. While for most citizens the price of homes in these cities seems impossibly unaffordable, for a very wealthy and significant subset of people, that simply isn’t the case at all. They can afford it.

“In San Francisco, we’ve had a rebound year after a slower market environment due to the rising mortgage interest rates in 2023. There has been more activity in the high-end sector of the market in 2024 as well,” said Scott Brittain, a real estate agent with Sotheby’s International Realty. “We have seen a 76% increase in the number of homes that have sold over the $5 million mark this year-to-date compared to last year. In 2023 there were 30 sales in that price category year-to-date, and there have been 53 sales in that same price range so far this year.”

According to Brittain, the average sales price for a single-family home in San Francisco was $2,883,693 in May of 2024, compared to $2,651,625 in May of 2023. That represents an 8.75% increase year-over-year.

Clearly, there are buyers with money out there. And they have decided San Francisco is a wonderful place to live, and they are willing to pay a premium price for that opportunity. 

A second list was released in June by The Business Journals – The Wealthy 1000, a new ranking of the nation’s wealthiest ZIP codes based on a weighted formula that looks at a number of wealth metrics. 

New York City’s zip codes occupy nine of the top ten spots. But then, here comes San Francisco. 94114 comes in at #10.  

According to The Business Times, California has the most ZIP codes on the list with 190, followed by New Jersey (111), New York (95), Massachusetts (79) and Florida (57). Among California’s ZIP codes, 73 are in the San Francisco area. Los Angeles accounts for 20 ZIP codes, while San Jose has 12 and San Diego 10.

Meanwhile, across the country, the share of homes sitting on the market for at least one month has been increasing year-over-year since March, according to Redfin. More than three in five home listings are now considered stale by recent standards. Stubbornly high mortgage rates and record-high home prices have priced many homebuyers out of the market, as the wealth gap continues to grow across the nation. Add to that a growth in the number of homes for sale, and the result is that less-desirable listings are piling up, leaving some without a buyer.

This is particularly true in the states of Texas and Florida. According to Redfin, these states are building far more homes than anywhere else in the country. While that is considered a good thing, it has had unintended consequences. The number of homes for sale is surpassing buyer demand. What’s more, because homebuyers in Texas and Florida are nervous about the increasing prevalence of natural disasters, homes can sit on the market in these states longer than elsewhere. 

The share of inventory sitting on the market for 30-plus days is growing fastest in Dallas. Slightly over 60% of Dallas listings that were on the market in May had been listed for at least 30 days, up from 53% a year earlier. Next come three Florida metros: Fort Lauderdale (75.5%, up from 68.2%), Tampa (68.7%, up from 61.9%) and Jacksonville (69.2%, up from 62.9%).

San Francisco has its share of homes on the market for more than 30 days of course. According to the report, 55.2% of San Francisco listings that were on the market in May had been listed for at least 30 days. But that’s actually down 3.1% when compared to last year.

According to Brittain, the San Francisco real estate market typically slows during the summer months, when so many people are out of town. Serious buyers will often revisit properties that are still available, however, and some absorption of the spring inventory of homes for sale inevitably takes place.

“We are seeing huge gains in the stock market, led by the AI boom which has allowed companies like Nvidia to grow into one of the most valuable companies in the world. And the Fed has indicated it will reduce interest rates at least once this year in the near future,” said Brittain. “All of this has provided for more consumer confidence in the strength of our local real estate market. And because there has been so much positive news coming out of San Francisco recently — like the red-hot commercial sales in the Jackson Square neighborhood — I believe we will have a robust residential real estate market this fall.”

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