Insights into the 2022 San Francisco Real Estate Market - And What It Means For You as a Home Buyer or Seller
There are many reasons why San Francisco is known as The Golden City, but to prospective homebuyers looking to put down roots in this area, this name is a reflection of the sometimes ridiculous unaffordability of San Francisco housing.
It’s no secret that San Francisco is no pauper’s playground. The median price of a home in San Francisco sits loftily at 1.6 million dollars. That’s a pedestal and more above the national median of $424,000. And of course, this SF median price is only on an upward trend.
The San Francisco Association of Realtors has acknowledged that median prices are at an all-time high - a median of $1.38 million for condos, and $2.2 million for single-family homes.
Buyer demand still high
According to the San Francisco Chronicle, the last two years “have driven unusually high costs even for the especially pricey metro area, propelled by a nationwide home inventory shortage that’s even more acute in the Bay Area.”
Extremely high demand and historically low supply, plus “the increased desirability of homeownership in a pandemic in which people are spending more time at home, has driven frenzied bidding wars in the Bay Area housing market.”
A San Francisco Real Estate market report by Compass, released in May 2022, states that the Bay Area is continuing to see “extremely intense demand”. Many buyers have scurried to secure a property in the early part of 2022, to take advantage of the low-interest rates before they escalate further.
Currently, the number of active real estate listings available corresponds to a 9-week inventory. Generally speaking, anything under 3 months is considered a “seller’s market”, so a 9-week inventory really shows how much of a seller’s market San Francisco continues to be.
Contrast this to the almost 12-month inventory at the peak of the pandemic and you’ll see just how much the housing market here has recovered.
Homes are being snapped up quickly by enthusiastic buyers, who are taking fast action to put in their offers, and generally overbidding to secure their new residence. Another record high, condo buyers are now paying 7% more than the listing prices, while house buyers are over offering by 23% to stake their claim over their dream home.
With such feverish housing demand, the list to lease process could happen in a matter of days, so if you’re a prospective home buyer, the consensus is and has always been: Act fast.
The Consumer Price Index, which measures the rate of inflation, hit 8.5% this March, the highest it’s been in 40 years. The Federal Reserve Bank’s countermove, as it has always done, has been to raise interest rates beginning this March - with promises of more increases to come, according to Reuters.
Despite rising mortgage rates, this still seems to signal good news for homebuyers.
Forbes notes that “over the past two years, while droves of Americans began working remotely and mortgage rates hit historic lows, home sales spiked,” but “now that interest rates and concerns about a looming recession are rising, the real estate market is cooling.”
This Mansion Global article also admits that “rising borrowing costs, the volatile stock market and record prices are giving buyers pause.”
Are we indeed seeing signs of the real estate market slowing down a little closer to home?
Patrick Carlisle, chief market analyst at Compass in the San Francisco Bay Area, says in their market report that the rising mortgage rates will likely affect the “less expensive homes - and possibly second-home markets.” The luxury real estate market does not seem to be affected since affluent buyers are less dependent on a mortgage. But for families looking to purchase more affordable housing, they may just be in luck soon.
An article in the Business Times quoted Jeff Tucker, senior economist at Zillow, as saying that “by fall or winter, it’s possible buyers will start to see some bargains” in “pricey West Coast markets like… San Francisco, and San Jose.”
Mark Zandi, chief economist at Moody's Analytics, even puts a timeline to it, saying that “overvalued” housing markets could see home prices fall 5% to 10% over the next 12 months. It might not be a drastic price drop, but buyers will at least begin to see list prices that are more in their budget range in the coming months.
This market leveling off will be especially beneficial for homebuyers who have been offering on properties over the last two years without any success in the market, because they, as CBS News states, "ultimately, haven't been able to compete" with the record high prices.
More inventory will mean greater supply to meet the furious demand of San Francisco home hunters, allowing buyers to finally gain some edge with competitive offers in the housing market.
This so-called “bargain” does not bode ill for home sellers, though. Selma Hepp, deputy chief economist at CoreLogic, notes that demand across the nine-country San Francisco Bay Area will still continue to be “really strong in the sense that it’s a lot of over-bidding still, most homes selling over the asking price and home price appreciation still continuing to trend at double-digit rates.”
The future of San Francisco real estate
While a lot of real estate experts have pinned market demand to mortgage rates, a working paper filed with the National Bureau of Economic Research shows that it was actually remote work that raised aggregate U.S. house prices by 15.1%, while lower interest rates and fiscal stimulus were of less importance.
Because of “the pandemic’s ‘work from anywhere’ boom”, states a Fortune.com article, the San Francisco metro area has seen “an exodus of workers”, as they no longer need to live close by to a physical office location. This has led to an outmigration from large metropolitan areas, and the Bay Area is no exception.
In the same vein, a data analysis by real estate listings website Redfin shows that the Bay Area real estate market might be looking at “more tempered” home-price increases due to the spike in departures of their residents to outlying suburbs.
In a San Francisco Chronicle article, Nicholas Bloom, an economics professor at Stanford and an expert in remote-work trends, suggests that “the current housing surge is less of a bubble than we might think,” since it is being driven by this new policy of working from home, instead of low-interest rates as it has historically been in the past.
He notes that it’s likely that San Francisco and the central Bay Area region will continue to see their “tech and finance workings moving out” into the suburbs if remote and hybrid work continues.
All this seems to imply that the future of housing costs in San Francisco may depend largely on the future of remote work.
If the current trends of telecommuting and working from home continue, and people find themselves happier settling down in more remote areas outside of bustling metropolitan cities, then there may be a switch-up in the demand and therefore condo prices and house prices in the busy San Francisco Bay Area.
Conversely, if employers start forcing their employees back into city offices, then that could spike up demand and prices of real estate located in and around the city hubs once more.
With rising interest rates, the future path of remote work in question - and not to mention, Governor Newsom proposing to turn unused retail and commercial space into much-needed San Francisco housing for its residents - what can we look forward to in the foreseeable future when it comes to the San Francisco real estate market?
Time will tell… But if you’re interested in discussing the future of selling your property, or purchasing your dream home, feel free to contact us at CKW Real Estate. We’d be happy to arrange a sit-down with you to answer all your queries. Don’t worry, we might not know exactly what the future holds, but you can rest assured that with CKW's real estate agents, you’re in good hands. ;)
1624 California Street
San Francisco, Ca 94109
United States
415-854-2224
crystle@ckwproperties.com
LINKS TO OTHER BLOG ARTICLES
QUICK GUIDE TO BUYING A HOUSE IN SAN FRANCISCO
THINGS YOU CAN DO WHILE QUARANTINED AT HOME
HOW TO BUY A HOME DURING COVID-19
GOVERNOR GAVIN NEWSOM’S EXECUTIVE ORDER EFFECTS ON REAL ESTATE
TO BUY OR NOT TO BUY IN SAN FRANCISCO DURING SHELTER-IN-PLACE
WHAT THE CARES ACT MEANS FOR YOU (CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT)
CONSTRUCTION UPDATES FOR SHELTER-IN-PLACE
CONFIRMING WITH THE IRS WHERE TO SEND YOUR STIMULUS $$$
SAN FRANCISCO: IS NOW A GOOD TIME TO SELL A HOUSE?
HOW SAN FRANCISCO REAL ESTATE GOT SO EXPENSIVE AND WHY SF REAL ESTATE VALUES HOLD
HOW TO CHOOSE A REALTOR TO SELL YOUR INVESTMENT PROPERTY IN SAN FRANCISCO: 5 ESSENTIAL TIPS
PROP 19 PROPERTY TAX CHANGES & ACTIONS TO TAKE
ABOUT CRYSTLE
As the CEO of a San Francisco-founded, global tech startup, Crystle understands from experience what it takes to succeed. Her real estate experience spans from successfully managing multiple properties over the last 10+ years including residential, commercial, and mixed-use, as well as her time spent actively investing in flipping properties, tax liens, tax deeds, and other property types. As a native-born and raised in San Francisco, you can trust that you’re in the good hands of a local who can help you navigate the micro-neighborhoods of San Francisco. Crystle invests in relationships and you can count on her to walk with you through the process of buying or selling your property.
You might ask yourself, “What does a tech startup have to do with real estate?”
Good question! Everything about Crystle exudes intention. Her ultimate goal is to grow her tech company so that she can utilize its philanthropic arm to fund micro-housing for the homeless in partnership with key, long-standing, and successful social services organizations in San Francisco. Real Estate gives her the ability to network and learn about developing land to purchase in the future to develop micro-housing. Her time serving on boards for these nonprofits gives her the knowledge of what these organizations really need to be able to get more people off the streets for good.
HER CURRENT FOCUS WITH REAL ESTATE CLIENTS IS TO WORK AND PARTNER WITH CHURCHES, NONPROFITS, AND AFFORDABLE HOUSING DEVELOPERS.
The same cornerstones that drive success in her tech company are the same cornerstones that make her the best real estate agent to work with: honesty, transparency, integrity, and a relationship-focused mindset toward life.
Crystle was born and raised in San Francisco’s Inner Richmond district and continues to choose to establish her future life in San Francisco as well. She is a woman of her word. She not only financially supports several not-for-profits, but also regularly serves in her community helping the homeless, youth, and those in poverty.
In her spare time, she is an active and current member of the Board of Directors of Lutheran Social Services of Northern California, the APA Heritage Foundation Committee of San Francisco, Board Member of Old Skool Cafe, and volunteer with Mobilize Love. She has previously and faithfully served on the Board of Directors for Zion Lutheran Church and School of San Francisco, the Board of Directors for Designing a Difference, the Board of Directors for APAPA San Francisco, a member of the Friends of Smuin Ballet, and as a Co-Chair for the Princess Project.