Median home sale prices in the city dropped again in the first quarter of 2023, according to Ted Andersen with the San Francisco Business Times. The median price for a home went from $1.564 million in the fourth quarter of 2022 to $1.528 in the first quarter of this year, representing a 2.3 percent decrease in three month’s time.
What’s more, compared to the first quarter of 2022 when prices and buyer demand were at their peak, median home sales prices in the city were down 18 percent year-over-year — the second most of any Bay Area county in that time period, and just behind Alameda County’s 18.5 percent decline.
“The long cold, wet, and windy weather did not help the real estate market. Highly motivated buyers were out looking at properties, but others who were weather-weary preferred to wait for sunnier skies,” said Barbara Stein Friedman, a top-producing broker associate with Corcoran Icon Properties. “Beyond that, the Fed’s interest rate hikes, tech industry layoffs, and fear of a recession are having a cooling effect on the San Francisco real estate market.”
RESET
Friedman went on to say that the past several years saw real estate prices skyrocket to stellar heights, and there has been a retreat so far this year.
For example, last year in March, 247 single family homes were sold in the city, with a median price of just over $2,452,000. By comparison, in March of this year, the number of single-family homes sold was 148, and the median selling price was just over $2,282,000. Selling prices that averaged 16.9 percent over listing prices in March 2022 dropped to 3.5 percent over listing prices in March 2023.
Sales are down, and prices are down. And it’s not just San Francisco.
Jeff Tucker, in an article published by Zillow, wrote that across the nation homebuyers are going to see more competition than they might expect — not because there are huge numbers of buyers with which to compete, but because there aren’t enough homes on the market to go around.
Tucker said homebuyers are still motivated and keen to hit the market this spring, in spite of a period of change unlike any we have seen in recent memory. Mortgage rates are not only high, but also volatile, which makes it hard for buyers to know what they can afford.
Sellers are the bigger factor in this cooling market, according to Tucker. New listings are increasing, as they almost always do this time of year, but not nearly as quickly as usual. High mortgage rates affect sellers, too, who have largely decided not to trade in their current mortgage for a new one with a much higher interest rate.
Looking ahead, Tucker believes mortgage rates will likely continue to have the biggest impact on market conditions. If mortgage rates fall, expect the market to heat up. If mortgage rates rise, or remain volatile, that will freeze buyer and seller activity.
RETURN
Back in San Francisco, this time of year is typically prime spring real estate season. With better weather, Friedman predicted that there might be an uptick in activity — and in everyone’s mood. She said some buyers had already adjusted to the shock of the quick rise in interest rates. Some sellers, who take the time and care to prepare their property for market, were still getting multiple offers and over-asking selling prices.
Friedman said that a number of the lenders she works with are recommending that when the right house comes along, people should use an adjustable rate mortgage for the purchase of their home — and then refinance when interest rates come down. She said buyers shouldn’t miss out on the opportunity to purchase a property that feels just right, because you simply never know if you will find a comparable one down the road.
On another note, according to Friedman, San Francisco real estate agents are talking about the condition of the city, homelessness, and crime. There is frustration with city government and a sense that nothing is being done to clean up the streets and improve the safety of San Francisco’s neighborhoods.
Nevertheless, Friedman said it’s unfortunate that the city’s reputation seems to make national news when other cities along the West Coast, and maybe across the country, have the same issues. She believes that the city is still a wonderful place in which to live, and San Francisco real estate is still an excellent asset to own, especially in comparison to the roller-coaster nature of the stock market.
According to Friedman, San Francisco has had a 10-year stretch of a sizzling hot market, so a little cooling is not unexpected. There have always been ups and downs, but San Francisco’s “downs” are not as severe as in many other communities. Friedman said historically speaking, San Francisco real estate is an excellent investment and now is an opportune time to buy.
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